swing trader looks for long-term
trends, to identify profitable
short-term moves within that trend.
These traders are not concerned with
any company fundamentals, only with
the stock price charts and technical
indicators to forecast price
the practice of
swing trading are entrance and
exit strategies to obtain the
maximum profit. The trader enters on
a price retracement and must have
already decided on an exit strategy.
Traders can decide to exit once a
stock reaches a certain price, or
they can set a moving (trailing)
stop sell order toward the end of
each day, which will automatically
sell the stock if it dips back down
to a certain level. In a
strongly-trending short-term move,
this actually can keep the person in
the trade for longer than
anticipated, an unexpected positive
occurrence. The most simple swing
trading method is to buy in a
pullback when the price begins
moving upward again, and sell as
soon as it dips back down.
can be used to identify good places
to enter and to take profit. The
trader draws a line under the bottom
of the uptrend and over the top, and
extends these lines into the future.
The trend lines point out ideal
places to buy and sell as the market
follows the trend upward.
uptrending stock that has stalled,
support and resistance levels can be
used for a simple
swing trading method. A support
level is the point where a stock has
historically stopped dropping in
price, and the resistance level is a
price at which a currencies
historically does not move higher.
These lines can be drawn back into
the past as far as is reasonable to
find a definitive price range. The
swing trader buys the currency when
it bounces off the support line and
sells when it hits the resistance
- Another entrance strategy occurs when prices are trending upward, then drifts downward for several days, enough to draw a short downtrend line over the top. When the price breaks out of this downtrend line with higher-than-usual volume, that is a signal to buy.
- Exit strategy would be the same as with other swing trading methods---taking a profit at a predefined price, taking profit by following a trend line, or following the upswing with a trailing stop.