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What Is Swing Trading?

Discussion in 'Swing Trading' started by Angela_Riplay, Oct 25, 2015.

  1. Angela_Riplay

    Angela_Riplay Forum Member

    Sep 9, 2015
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    What is Swing Trading

    Everyone is familiar with waves. A wave alternates from positive to negative, then
    to positive and negative, and so on. Waves are found in nature – you see waves
    when you throw a rock into a lake. Sound is transmitted in waves. And when stock
    prices change, they follow a wave-like pattern. The wave is rarely as orderly a sine
    wave, but they are waves nevertheless, and we use these waves in Swing Trading.

    Let’s Look at an Up Trends

    The chart below shows the price movement of Myriad Genetics (MYGN) in an
    uptrend. Notice that after the price moves up, it takes a rest, or pulls back. When
    we swing trade an uptrend, we buy on the pull-back.

    An uptrend can be identified by a series of higher highs and higher lows (the bottom
    of each pull-back). In other words, an uptrend is a series of successive rallies with
    each rally going higher than the previous one and each pull-back stopping above the
    previous one.

    The price movement looks more like the zig-zag of a saw blade than a sinusoid, but
    once an uptrend is established the pattern tends to repeat itself. In swing trading
    we capitalize on the predictability of the pattern. We buy during the pull-back to
    increase our chances of making a profit.


    Let’s Look at a Down Trend

    The chart below shows the price movement of Verisign (VRSN) in a downtrend.
    Notice that after the price moves down, it takes a rest, or pulls up. The price
    movement follows a zig zag pattern.

    A downtrend can be identified by a series of lower lows and lower highs (the peak
    of each pull-up).

    When we swing trade a downtrend, we sell short during a pull-up. If you are
    unfamiliar with selling short, we discuss it in the next session.


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