Trading has existed for many centuries and is the basis of much of civilization’s progression. While traditional trading still exists to this day, it has evolved significantly in recent years. Because of the advancement of technology, stock trading became possible. Stock trading further evolved into online trading due to the improvement of the internet and its connectivity.
Many people get involved in online stock trading to make a profit as the market changes. This may lead to people taking out loans or using trade finance services to get started. There are many strategies for stock trading and investing, and one such strategy is known as swing trading. In this article, we will look at how you become a professional swing trader.
What is Swing Trading?
Swing trading is a strategy for profit by capitalizing on upswings and downswings in the short term. Swing traders will often hold positions for six days to a few weeks, depending on how profitable the trade is. The goal is to make small gains in a short time which allows them to cut losses quicker. Though the gains are small, they can add up quite handsomely if a consistent profit is made.
The advantage of this strategy is that it allows efficient capital use with higher returns, but the drawbacks include being more volatile with higher commissions. This is why more experienced stock traders should generally use swing trading as they have a better idea of the market. This strategy relies on technical analysis of specific indicators, which we will discuss now.
Premarket Routine
Swing traders will generally begin their day well before the daily trading session for two main reasons. To get information about the daily market and any news that might affect it and to get an idea of potential trades. They may generally use news websites or channels to get an idea of developments in the market. After that, traders will attempt to find a fundamental catalyst through special opportunities and sector plays. They will then make a watch list of stocks to watch out for, which they think might lead to a good trade.
Market Strategies
There are various strategies that you can use to swing trade successfully. Momentum trading is at the core of swing trading strategies. Another frequently used strategy is called Fibonacci retracements.
Fibonacci Retracements
Fibonacci retracements are a popular swing trading strategy. This strategy uses the Fibonacci retracement pattern that can help identify resistance and support levels which can help identify reversal levels on stock charts. The concept of this pattern is that stocks tend to retrace a specific percentage before reversing again. Plotting lines at Fibonacci ratios, typically 61.8%, 38.2%, and 23.6%, can help you see reversal levels. Some traders may even look at the 50% ratio level as well. These ratios can be used as resistance and support levels change to profit from stocks as they change in the market. There are many Fibonacci retracement-based strategies, and we recommend checking them all out if you’re interested.
Using Technical Analysis Tools
Technical analysis tools can help swing traders develop their strategies or even strengthen any that they are already using. They are an essential asset to have under your belt as they will make your research much simpler. There are many tools available, so you should use one that compliments your style and strategy. Some tools are:
- StockTwits: In essence, this analysis tool combines the feed UI of Twitter and turns it into an app that provides real-time news on stock trades. You can also see what other traders are seeing on this free tool.
- TradeMiner: TradeMiner is a tool that can help you conduct any technical research you may need. This includes looking at marketing trends for making profits and historical prices to understand trends.
- TradeTracker: TradeTracker is a simple tool that helps you keep track of all your trades. It may not be easy to keep track of so many trades at once while you’re swing trading so this tool can help.
The Bottom Line
Stock trading is a popular investment niche where there is a lot of potential for making large profits. Swing trading is a strategy that involves holding positions for the short term. If done well and consistently, it can lead to significant profits.
There are a variety of strategies for swing trading which we have discussed in this article. We have also discussed what premarket routine a professional swing trader will generally have. We hope this article has provided you with insight into swing trading and may inspire you to include it in your trading strategy.