Last Updated on Dec 19, 2019 by James W

It’s said that a fool and his money are soon parted. That’s the idea behind many get-rich-quick schemes out there. But what if you could make a profit from playing the market without risking your neck? That’s just what swing trading sets out to do. By doing your homework, you can find stocks that are winners in the short-term, giving you plenty of options in the market while also diversifying your portfolio and strategy. If you’re new to swing trading, find out the elements and features that make it one of the most popular new investment methods.

Swing Trading vs. Day Trading

Differentiating between swing trading and day trading is one of the hardest concepts to grasp, as both methods aim to make profits with short-term investments such as stocks, currencies, or commodities. However, the main difference is that day traders rarely hold these investments overnight, while swing traders can keep investments in their portfolio for days or weeks at a time.

Swing Trade Basics

Understanding swing trading puts you in a position to maximize your profits while minimizing your risks. The first step toward becoming a successful swing trader is learning all about technical analysis. This involves learning patterns in 15-minute, 30-minute, one-hour, one-day, five-day, or week-long charts. Although it takes some study and time to identify these patterns, doing so can drastically improve your chances for profitability.

Benefits of Swing Trading

Because swing traders aren’t looking to make quick money each day on fluctuations in the market, they can afford a less hands-on approach to trading. This has many benefits. The most apparent advantage is that you don’t have to analyze the stock market every hour of every day. Checking your position once a day or every few days should suffice unless you’re anticipating a massive change in your commodity or stock. This also enables you to use swing trading for supplemental income or as a hobby.

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While any trading has the potential for losses, swing trading minimizes this potential for the novice investor. Instead of using an overwhelming amount of data and state-of-the-art technology like day traders, it’s more of a laissez-faire operation, allowing you to conduct all of your trades and research at home on your personal computer.

Risks of Swing Trading

While the benefits of swing trading make it an enticing investment venture, there are also risks and cons. Margin requirements are higher for swing trading because you hold the investment overnight, requiring larger leverage margins. In addition, the longer hold of securities and commodities means larger risk, as markets continue to fluctuate after close. To hedge this risk, set boundaries before investing. This could include how much you’re willing to lose in a given period or starting off with established investments rather than high-risk penny stocks.

By learning the basics, investing time into study, and practicing your skills before playing the market, you can turn swing trading into a lucrative venture without taking time away from your day job or social life. It’s an exciting twist on building your wealth that’s too much fun to ignore.

Image via Flickr by rednuht


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