Part 3 of 3
Swing trading captures short to medium-term gains over weeks or months (as opposed to day trading that captures gains in one day).
The main difference between swing and day trading is the time frame. Day traders work with a short time frame whereas the swing traders work with a much longer time frame. If you are patient as you always are, swing trading is better.
- Swing trading involves making trades over a few days, weeks, or months. As a result, swing trading accumulates gains and losses more slowly than day trading.
- The goal is to capture short-term to medium-term profits as trends change in a market.
- Most fundamentalists like me are swing traders since changes in corporate fundamentals generally require days or weeks to cause sufficient price movement for a reasonable profit.
- Capital requirements vary for day traders and swing traders depending on whether they trade the stock, forex, or futures markets.
- Day trading may be a good choice for those who want higher profit potential, while swing trading may suit those who want a lower-stress option.
- Swing trading sits between day trading to trend trading.
- The first key to successful swing trading is picking the right stocks.
- Picking stocks for swing trading will involve a mixture of fundamental and technical analysis.
- Fundamentally, buy stocks that have reasonably priced valuation, strong earnings, and healthy balance sheet.
- Technically, use support and resistance levels and indicators that show volume and momentum.
- Do swing traders beat the market? Yes, if you have a good trading strategy, and enough discipline to stay with it throughout its ups and downs.
- Why do swing traders fail? For lack knowledge and are undercapitalization.
Bottom line: Swing trading is risky and demands a great deal of time. The counterargument is that swing trading exposes a great deal of capital to risk but makes only small profits.
Personally: I’d rather enjoy an assured small profit than a potentially bigger gain that may not happen.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.
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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to [email protected].
