What is swing trading anyway?
This technique is often used by stock and options traders and tends to be more long term than day trading. Swing traders seek to capture explosive moves in the market, up or down, for profit. When the swing slows, they exit the position. As many swing traders will tell you – the trend is your friend.
If you break down the term swing trading into its components, the first part is a swing. No matter the technique, if there’s not a swing of some degree after you buy, then you will not be able to sell at higher prices and vice versa. Trading is the next part of the term and you shouldn’t take this lightly. There is a big difference from traders and passive investors. Traders don’t buy and “hope.” They never get married to a trade regardless of what they hear from the media, friends, relatives or whomever.
Swing trading can be broken down into three key phases:
1. The Development Stage
2. The Recognition Stage
3. The Bandwagon Stage
Knowing how to identify each stage at the optimal time and how to react during those stages is key. Here are some tips on improving your swing trading skills and increasing your profitability.
The Swing Trading Development Stage
The first stage is the development stage. Swing traders want to be able to identify an opportunity early on so they can get into position during the development stage. While this is obviously an optimal situation it is often difficult for traders to implement. Why? Because on a chart, this often looks like a congestion or balancing zone.
Recognizing Profits in Swing Trading
The second stage the recognition stage. This is where you can begin to see a surge in price, either upwards or downwards. Those fortunate enough to have entered during the development stage are often challenged with remaining in a profitable position for a longer period of time. The idea is to capture more of the swing, not to lose confidence and get out while leaving money on the table.
Swing Trading Exit Strategies
Finally, there is the bandwagon stage. This stage is usually determined by a plethora of market specific news reports mentioned on TV.
The bandwagon stage is where many people lose money when investing, especially when investing without a defined plan. Now, that is not to say that those who enter the market at this time are going to lose, but all too often the trend is over by this time.
Timing is Key for Swing Trading
If you’ve already picked up on the common trend here (see what we did there?) timing is everything for swing traders. It’s near impossible to be successful in any of these 3 stages if you don’t have a system or a strategy for knowing what may happen in the market.
Meet your solution.
VantagePoint Trading Software has been utilizing Intermarket Analysis with predictive technologies to forecast market strength and direction for the past 25 years. This proven technology helps swing traders identify developments before they happen, gives them the confidence to stay in position longer and warns of when a trend may be coming to an end. With accuracy documented up to 86% for some markets, this technology has changed the game for swing trading as it provides consistent and accurate data for traders.