Earn Income From Swing Trading Strategies With Technical Analysis, Market Timing, And Best Stock Selections
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What type of trading strategy is swing trading exactly?
Swing trading is a term that describes a type of short term trading strategy that takes advantage of short term moves in stock prices that are a component of a longer term trend. Swing trading focuses on trade cycles anywhere from a couple of days to a couple of weeks, depending on the characteristics of the stocks price movement.
There are essentially two main types of traders in today’s equity market (besides the professional floor traders and specialists); day traders and institutional traders.
Day traders are extremely short term oriented . Day trading usually consists of searching for an opportunity to capitalize on extremely short term movements of a stock during market hours. Many traders are looking for a predictable movement of 5 or 10 cents, sometimes more, sometimes less. Day traders typically never want to hold a stock or any position overnight. Trading at the opening bell is just too unpredictable and volatile for them. A day profitable day trade held from the prior day can easily gap against them at the opening of the following day either wiping out any profits or creating a devastating loss that takes a lot of winners to recover from.
Institutional traders at the opposite extreme have a different problem. These types of traders are the big elephants of Wall Street The amount of cash some of these institutions have to manage frequently moves the market for the stock they are buying and selling if transactions are not performed properly. Institutions employ large brokerage houses to move funds into and out of stock positions over a time period that can take weeks. The brokerage house then tasks the floor trader to move the funds without affecting the market price too much. The floor trader tests the market, buying some shares, selling them back, buying some more, selling them back, until the institutions funds are fully invested. When an institution wants to get out of a position the situation is reversed.
Luckily for us, these transactions typically show up in a proper technical analysis so we can jump on a trend using swing trading concepts when it is appropriate.
So swing trading, with its average duration of a few days to a few weeks fits right between the day traders and the large institutional trading.
What does this mean to us as practitioners of the swing trading strategy?
It means that the individual astute swing trader is essentially devoid of any real competition for their trades. Neither the day traders nor the institutions are interested in the swing trader timeframe. Our only real competition is ill-informed retail traders.
And that spells opportunity for you.
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Tags: market timing