Swing and Day Trading: Evolution of a Trader

CHAPTER 1

Introduction to Swing Trading

Swing trading reminds me of standing on the shore of an ocean, watching the waves. Each wave has a crest and trough—a swing from high to low or low to high that mimics the up and down motion of stocks. Swing traders do not try to surf that wave by riding near the crest, but by sailing their boat from trough to crest like in scenes from The Perfect Storm.

WHAT IS SWING TRADING?

There are two types of swing trading styles. The first is to range trade, that is, buy and sell as price bounces between a low and high price. If you know what a rectangle chart pattern is or a channel, then you can buy near the bottom and sell near the top repeatedly. I find that the profit potential of range trading is not exciting enough for me.

• Range trading is buying and selling as price bounces between highs and lows.

I prefer to catch a swing as soon as it starts and hold it until it ends. It is the same idea as a range trade but the high–low range is often much larger (if you are lucky) and you only trade it once.

• A trend trade buys near the swing low and sells near the end of a short-term trend (or the reverse: sell high and buy low).

Swing trading is trying to catch price as it moves between peaks and valleys. Another way to say this is that swing trading is capturing the move between layers of support and resistance.

Why not just hold onto the stock and ride it? You can do that, of course, but swing traders believe that they can increase profits by participating ...