Tune in to any stock market news broadcast and you are bound to hear about the momentum of the market in one direction or the other. Newscasters are always talking about “which way the market is heading” and similar topics.
As an observer you might wonder what it is that they are getting at exactly and how you can profit from it.
We all know that the market can move up or down as buyers and sellers work out what they believe is the correct price for a given security at a given time.
As such, there are some traders who will attempt to profit from this by getting involved in what is known as “swing trading”.
Swing Trading Strategy
Swing trading is a trading strategy whereby an investor attempts to profit from short term movements in a security that may last anywhere from one day to perhaps a few weeks in duration.
A trader who tries this strategy on for size is looking for a stock that has the potential to move in the direction they want it to in a significant way in a short period of time.
In order to find a stock that works like this, most traders would look for some event that is likely to push the stock one way or the other. An event might be something such as an earnings release from the company or perhaps a geo-political event that could have an impact.
For example, if the government is about to pass a new batch of financial regulations one might expect that the financial stocks will see some movement.
In order to be successful with swing trading one must have the ability to sniff out a stock that is about to make a move.
They must also be able to tell which direction the stock is likely to move in, and they must be able to place those trades without hesitation.
Like with any type of trading mistakes will be made from time to time. It is more about how the trader reacts to those mistakes and how well they can manage their risk when trades go against them.