Candlestick Trading Blog

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Swing traders are not concerned about perfect timing when buying stock as it relates to the highs and lows, but instead they wait for stock to hit its baseline and to confirm its direction. Then these traders will make their move. Swing trading is actually described as the type of trading that lies in between trend trading and day trading. Trend traders hold stock for a few weeks to months whereas day traders hold stock for seconds of the day, but never more than one day. Swing traders lie in the middle because they hold stock typically for a few days to two or three weeks.

When swing trading, traders are better positioned when the markets aren’t going anywhere, unlike other types of trading. They look for markets where the indexes rise for a couple of days and then decline for the next few days, only to repeat this pattern over and over again. The trick, when swing trading stocks, is to know which type of market is currently being experienced. The theory that swing traders follow is that momentum will typically carry stocks in one direction for a long period of time during a bear market or a bull market. Some say that this confirms that swing trading is the best strategy to trade on the basis of a longer term directional trend.

Additionally, when swing trading, a critical factor is picking the correct stocks and many see large cap stocks as the best option. This type of stock is the most actively traded stock on the major stock exchanges, and consequently provide great rides for swing traders. During an active market, large cap stocks will swill swing between generally defined low and high extremes allowing the trader to ride the market in one direction for a couple of days or weeks only to switch to the opposing side of the trade once the stock reverses direction.

Equally as critical with this trading strategy is the timing in which swing traders exit the trade and take their profits. The goal is to exit the trade without being overly accurate, and as close as possible to the upper and lower channel line. It is interesting to note that in a strong market, traders can wait for the channel line to be reached before they take their profit as long as it is a stock that is exhibiting a strong directional trend. On the other hand, during a weaker stock market, traders must take their profits before the channel line is hit.

This type of trading brings with it the potential for great profit and is a great alternative to the more intense trading strategies such as day trading. It requires just as much extensive knowledge, but may be an investment option that may be a less stressful option for more conservative traders. Continue to learn about swing trading as well as other types of stock trading and see what works for you.