What Sets Swing Trading Apart?

People who become interested in swing and day trading usually start as traditional investors who use a long-term, buy-and-hold approach to investing. While this long-term approach reduces risk, it also can take years to produce financial growth, so some people look for ways to expedite the wealth-building process. Swing and day trading give people the opportunity to generate returns that can surpass the gains that can be made from buy-and-hold strategies much more quickly.

Swing trading
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Swing Trading Versus Day Trading

Understanding swing trading is easy and doesn’t require a degree in finance. It’s simply a method of trading in which assets (typically stocks) are held for a few days in order to capture a profit through short-term market fluctuations. Swing trading doesn’t require constant monitoring, so traders can take a relatively relaxed approach.

Day trading, on the other hand, requires traders to buy and sell their holdings on the same day. Trades are held for only a few hours, so large price jumps are unusual. Consequently, most day traders make money through numerous small gains and must monitor their positions constantly.

Swing Trading Works with a Variety of Schedules

Swing traders can go to work during regular market hours without endangering their investments. Since swing trading doesn’t require your undivided attention, you can go all day without checking your trades, making swing trading a good option for those who want the benefits of short-term investing without committing a substantial amount of time.

To get started, analyze the stock that you want to buy and determine how much you want to pay for it. Then, place a buy stop order, an order to buy a stock at a specified amount, for that price. After you buy the stock, put in place a protective stop order, an order that allows you to pick the price at which you want to sell. Protective stops remove some of the risk associated with short-term investing.

Swing Trading Gives You Time to Analyze Stocks

Swing trading gives you more time than day trading to analyze shifts in the market. While swing trading does require a lot of your attention, it doesn’t take over your life. Much of the pressure of day trading is eliminated, and you don’t have to sit in front of a computer monitor all day tracking market fluctuations.

Reasonable Goals Are Vital to Success

A reasonable target profit for swing trading is 5 to 10 percent. This may not seem like much, but, when you consider the timing, it makes sense. Swing traders don’t focus on gains that take months or years to develop. On the contrary, most swing trades take place over a few days. Profits between 5 and 10 percent every week or two can add up to a considerable amount of money.

Swing trading gives you the opportunity to profit more quickly from stocks and options than traditional forms of investing, yet it doesn’t come with as much risk as day trading. It’s a good method for those who want to make short-term investments but don’t want to sit in front of a computer all day. While nothing is guaranteed in the stock market, swing trading is a good way to use the market’s fluctuations to capture gains and make money.