In today’s fast-paced investing world, investors are always looking for a way to make big money quickly. One of the newer strategies certain investors are utilizing to make quick profits is called swing trading.
Spend a few minutes analyzing your favorite stock, and you’ll inevitably notice that there are daily price dips, gains, and plateaus in that particular stock. Swing trading — or swing investing — is an investing style that takes advantage of daily, weekly or monthly changes in a stock’s price.
Swing traders take advantage of these dips and gains to make profits in the stock market. For those unfamiliar with this investing style, this article will discuss the basics of swing trading, as well as talk about the benefits of using swing investing in the financial world of 2019.
More on Swing Trading
As we alluded to before, the primary goal of swing trading is to profit off of a stock’s price change in the stock market. Generally speaking, swing traders are holding their stocks for at least one trading session — although some swing traders choose to buy and sell stocks on a weekly, monthly, or quarterly basis.
Some swing investors purposely target volatile stocks with lots of price movement, while others prefer more steady stocks. Either way, swing traders are attempting to determine what a stock will do in the immediate future so that they can capture the profit that comes from a gain or loss. Instead of sticking with stocks for years or decades, swing investors buy a stock, sell at the next price change, and then move on to a different stock.
The Benefits of Swing Trading
One benefit of swing trading is that it takes much less time than day trading, making it beneficial for investors who want to make profitable investments easily and efficiently. Successful swing traders can also enjoy huge short-term profits in a very short period of time if they make a string of successful stock picks.
The Disadvantages of Swing Trading
While there are certainly benefits to swing trading, there are definitely disadvantages to this investing style, too. One big disadvantage is that swing traders often lose out on the long-term gains a company is likely to enjoy over decades of a profitable business.
Another disadvantage of swing investing is that an investor’s trading position is sometimes at the mercy of weekend or overnight changes, which could result in sizable losses if the stock an investor is attempting to sell is volatile.