Swing Trading – Another Stock Investing strategy?
As the word “trading” indicates swing trading is actually not stock investing. Stock Investing is always aimed at holding something for a longer term.
Swing trading has the purpose to buy a stock and hold it for only one to four days. Thus, it is very short term orientated. Even in a stable trend a stock is always in motion not only in one direction. Within an upward trend short termed downward movements are not rareness. The same is valid for a downward trend pattern. Here a trader can make use of rapid rising stock prices.
Generally, for swing trading bar charts are used. These bar charts however are slightly changed in so far that 4 different occasions can be differentiated and given different colors (colors can change):
1. Green: Current high is higher and low is higher than the day before.
2. Red: Current high is lower and low is lower than the day before.
3. Black: Current high is lower and low is higher than the day before.
4. Blue: Current high is higher and low is lower than the day before.
After this the points have to be marked where
- an up day is followed by a down day and
- a down day is followed by an up day.
The criterion for being a down or up day is not the closing price but the highest or lowest point of that day. So a green chart doesn’t always need to be followed by a red chart only, it could also be a black chart. This is possible, because the black chart doesn’t make a higher high.
These points describe a change in a trend. Whenever a down day is followed by an up day the trader should enter the position and immediately set his stop at the previous days’ low.
The same is valid for the other case with the difference of not buying but short selling.
If stock investing is too boring for you maybe swing trading could be an adequate substitute.
Stock Investing
Swing trading has the purpose to buy a stock and hold it for only one to four days. Thus, it is very short term orientated. Even in a stable trend a stock is always in motion not only in one direction. Within an upward trend short termed downward movements are not rareness. The same is valid for a downward trend pattern. Here a trader can make use of rapid rising stock prices.
Generally, for swing trading bar charts are used. These bar charts however are slightly changed in so far that 4 different occasions can be differentiated and given different colors (colors can change):
1. Green: Current high is higher and low is higher than the day before.
2. Red: Current high is lower and low is lower than the day before.
3. Black: Current high is lower and low is higher than the day before.
4. Blue: Current high is higher and low is lower than the day before.
After this the points have to be marked where
- an up day is followed by a down day and
- a down day is followed by an up day.
The criterion for being a down or up day is not the closing price but the highest or lowest point of that day. So a green chart doesn’t always need to be followed by a red chart only, it could also be a black chart. This is possible, because the black chart doesn’t make a higher high.
These points describe a change in a trend. Whenever a down day is followed by an up day the trader should enter the position and immediately set his stop at the previous days’ low.
The same is valid for the other case with the difference of not buying but short selling.
If stock investing is too boring for you maybe swing trading could be an adequate substitute.
Stock Investing
posted by jophan at
1:31 PM
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