3 Methods for Successful Swing Trading

Swing trading is a valid method of trading stocks and making a profit, but it requires good money management, a willingness to put in the research, and the ability to accept the fact that you’re not always going to make a large profit on a trade. Understanding swing trading is easy, but executing your trades so you earn money takes study and research. Below are three methods to help you become a successful swing trader.

Manage Your Money

There’s an old saying that investing in the stock market is a lot like gambling, and there is an element of truth to this. However, you can control your money by engaging in smart money management. Keep track of your starting balance, work out an estimate of profit based on the past performance of the stock you plan to invest in, and don’t hold onto the stock once it has reached your planned profit.

A stock can keep increasing in value, but it can also decrease suddenly, leaving you with a loss. Losses are going to happen, and it’s never an easy thing to accept, but an occasional loss can be overcome by many profits. Plus, some losses can also be avoided by sticking to your plan and not pushing your luck.

Study Past Performance 

Stocks have a historic performance record that’s a good indicator of how they’ll perform in the future. There are no guarantees that the stock is going to keep performing as it has, but barring bad news from the company, you can reasonably assume that a stock will tend to perform within historic parameters going forward. By studying the historic performance, you can uncover patterns that tell you how to handle the stock for swing trading.

Don’t overlook the company behind the stock when you’re looking at what you should swing trade. The performance of a company is what drives the performance of the stock. Corporate ethos and operating procedures have a far greater influence than you might realize. Some people buy stock in corporations because they have a way of doing business that is unconventional yet successful over the long term. Alternately, they may buy stock because the company adheres to old-school operating principles that see a steady rate of return over time.

Don’t Seek Large Profits

Earning money on swing trading is more about making multiple small gains than a single large gain. Before you buy a stock, you have to figure out what your acceptable profit is for that trade. You also need to factor in the fees that come with executing a trade, then subtract that amount from your acceptable profit. You might be able to realize a profit that goes past your estimation, or you might not. It’s easier to expect multiple small profits over time as opposed to one large one and have a pleasant surprise in a large profit now and again.

These methods are part of what it takes to become a successful swing trader; don’t rush the trades, take the time to study the companies, and watch your money inflows and outflows. Slow but steady wins the race when it comes to short-term trading.