4. Swing Trading-Simpson
4.1 How to Use Swing Trading
A Swing trader buys and holds stocks generally for a period of a few days to a couple of weeks. As a swing trader you don’t care about the fundamentals of a company or the products they sell but you focus on the technical analysis. Swing traders use technical analysis to look for stocks with short-term price momentum. Paying attention to a stock’s price trend and patterns are key to being a successful swing trader. A general motto for a swing trader is buy at the bottom and sell at the top.
Choosing when to buy and sell stocks is very important for a swing trader. The first thing to do is take a look at the stock charts. The first thing to look at is the stage the stock is in. There are four stages that a stock goes through with a time frame of a day, week, or even a month. Stage 1 is considered the time after a downtrend, stage 2 is the beginning of an uptrend, stage 3 is the peak or sideways trend and stage 4 is the beginning of a downtrend. A swing trader wants to buy stocks in stage 2 and sell stocks at stage 4. The second thing to look for is the strength of the current trend of the stock. A weak trend is when the stocks jump up and down all the time. A
swing trader is looking for a strong upward trend. The third thing a swing trader will look at is the relative strength of the industry. The best way to tell the relative strength of an industry is to compare it to the market. The industries that do well on days that the market falls on have good relative strength. Those are the industries a swing trader wants to be in. The final thing a swing trader will look at is the market capitalization. A swing trader wants to invest in a large market capitalization, greater than 10 B, because they are actively traded and tend to have large swings causing a greater profit is bought and sold correctly.