An introductory article on swing trading. Give you an idea of some of the benefits and drawbacks:
I can briefly describe swingtrading as taking advantage of brief price swings in stocks lasting anywhere from 1 day to a month and using technical analysis to pinpoint entry and exit points. This is not perilious daytrading or scalp trading. Nor is it buy, hold, and pray. Some people call it momentum investing, because you only hold positions that are making major moves. By rolling your money over rapidly through short term gains you can quickly build up a lot of equity.
Think of your equity as inventory in a retail business. The way retail giants such as Wal-Mart make so much money is by turning over the inventory as rapidly as possible. The magic of compounded gains can produce incredible yearly returns. Thankfully the stock market moves in such a way to make rapid turnover profitable.
My basic strategy is to jump into a stock when it moves out of consolidation periods and breaks through resistance levels. It then often makes a quick move which I can profit off of. I then sell once the move is over and leave the stock behind as it begins a new phase of consolidation or sideways movement. I then take the money and find another stock and repeat over again. I also play the short side by shorting stocks that fall through support levels. In summary, my goal is to capture the quick moves stocks make in their life span, keep the risk low through money management techniques, and keep my money working in only the most active issues. I am willing to hold a stock for as long as possible as long as it is moving in my direction and making me money.
From FOX MarketWire - Investors Get Into the Swing
http://www.foxmarketwire.com/money/032300/swing.sml
By Robert Bates
Instead of furiously buying and selling stocks by the hour like most day traders, Rhonda Reskin opts for a more laid-back approach to reaping Wall Street riches.
The Louisville, Ky., mother "swing" trades, or holds onto stocks for a few days or a few weeks, instead of clearing her portfolios at the end of each day. Although this strategy still poses high risks, many investors regard swing trading as a good way to make money without the migraines.
"In this market, it can take stocks a week or two to consolidate," Reskin said. "You miss a big portion of their gains if you are day trading." Plus, Reskin added: "It allows me to go pick up my kids at noon."
Online brokerages don't keep track of their swing trading customers, but they have noticed more investors experimenting with this tactic.
"It's without a doubt getting more popular," said Eric Winchell of kinetictrader.com, an investment site. "Most day traders are drawn into it by the thrill and casino-like atmosphere. But when they learn what really moves stocks, they realize that there are also gains to be made at a slower pace."
Insiders say swing trading works well for part-time traders â especially those doing it on the sly at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in Nasdaq Level II quotes, swing trading doesn't require that type of laser focus.
"It's the difference between a sprint and a jog," said Richard V. Rueb, executive director of Day Traders USA, an organization for day traders. "I can only day trade for a couple of hours each day, but I can swing trade all day."
While day traders gamble on stocks popping or falling by fractions of points, swing traders try to ride "swings" in the market. Its advocates say that by buying fewer stocks and aiming for bigger gains, they pay lower fees and, theoretically, have a better chance of earning larger gains.
"With day trading, the only person getting rich is the broker," said Pejman Hamidi, CEO of Egoose.com, which gives tips for swing traders. "Swing traders go for the meat of the move while a day trader just gets scraps."
Unlike day traders, swing traders also tend to rely on long-term technical research when making their stock picks.
"I spend a couple of hours each night looking over different stocks," explained Michael Swanson, editor of Swingtradingonline.com, which offers trading tips. "A day trader might just jump on the computer and see what's active."
Still, swing trading is hardly stress-free. In fact, some believe it's more stressful than day trading because of the stock market's extreme day-to-day volatility.
"With day trading you can watch something second-by-second and adjust your strategy instantly," said Bill Lauderback, spokesman for the Electronic Traders Association.
Steve Burris of Tradewiser.com, a site for day traders, added that day traders sleep better knowing they're not subject to overnight market catastrophes.
"It's not as great a safeguard as going home in cash every night, but it will shelter you from all but the worst downturns," Burris said.
