A famous bank robber once said that he robs banks because that’s where the money is swing trading. Similarly, if you want to make money and make it quickly, you need to go where the money is: Wall Street. One of the most effective ways to make money off Wall Street is through swing trading. You can get rich through this form of short-term trading. The good news is that it doesn’t require fancy software or extensive finance and equities trading backgrounds to pull off. You just have to the right plan and mindset. Here is a general discussion on how you can take advantage of opportunities in the stock market through swing trading.
What is Swing Trading?
Just like day trading, swing trading is all about buying based on the momentum or trend of stocks. The most common way to make money, of course, is to buy low and sell high. You can short stock and sell high and buy low but this is harder to do for beginner swing traders. Regardless, swing trading is all about making short-term gains by betting on the momentum or trend of stocks. Unlike day trading where you bet on very short time frames like 3-minute or 5-minute time frames, swing trading can involve longer time frames like single days or several days. Instead of being glued to your computer monitor trying to cash in on a few fraction of a percent moves, you can pull down some decent money waiting a little bit longer. Of course, the wait time for swing trading is all relative. The amount of time you wait while swing trading is still much shorter than the typical trading strategy of a fundamental or value investor. Here are some key
This is day trading. Swing trading does not need to be this intensive.
Think of swing trading as betting on ships on an ocean. While the amount of money you make will be determined by the particular movements and activity of the specific ships you’re betting on, the overall condition of the ocean still plays a role in how your ships do. While this might be a small factor during most days, in certain days, like when there is a storm that is moving towards the ocean your ship is operating in, overall market sentiment can dramatically impact your particular swing trade positions. Pay attention to geopolitical events or central bank actions along with broad market news trends.
Determine different sectors’ sentiments
Your specific stocks’ movements are also affected by the broader industry the company you’re betting on operates in. Think broadly, look at related sectors. These might impact your stock’s industry and this can drive the stock up or down. Also, pay attention to long term trends within sectors. Negative sector sentiment allows you to prepare for a quick exit once your stocks’ numbers start trending toward a certain level.
The power of the right news
The stock market is all about psychology and perceived value. Sure, a solid earnings statement from the companies you’re covering have a great impact, but on the whole, stocks are influenced by momentum and trends. Pay attention to the news flow and volume regarding your covered stocks. Get ready to swoop in when certain conditions appear. On the other hand, get ready to sell when certain news trends appear.
Riding the market’s herd mentality
As much as Wall Street operators like to think they are original or creative thinkers, there is a lot of herd mentality or group thinking going on when it comes to stock trends. This is why it is important for you to beat the market and scoop up stocks before positive trends bump those stocks’ prices up due to Wall Street firms piling on a sector or a group of certain stocks. Ride the herd mentality and set your price targets. Once the market’s herd movement hits your target price, exit the stock and wait for an opportunity to enter the stock again after a fall or price consolidation.
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