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What Are the Best Tips for Swing Trading Stocks?

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  • Written By: Jim B.
  • Edited By: M. C. Hughes
  • Last Modified Date: 05 November 2016
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Swing trading stocks refers to the practice of making stock trades which ideally can earn investors a profit within a few days, at which point the trading position is closed out. This requires a great deal of expertise and experience, so investors should consider practicing this technique by paper trading with a simulated account. Investors who want to try swing trading stocks should be prepared to look for stocks with high levels of volatility if they want to gain significant, quick profits. In addition, they should be prepared to institute stops for each of their trades to prevent losing large amounts.

The practice of swing trading stocks has grown exponentially with ability to make trades via computer. This technological advance allows investors of all stripes to make several trades within a short period of time. With this ability, swing traders have to be less concerned with the intrinsic value of the companies that issue the stocks and more concerned with the short-term price trends of the stock itself.

Making so many trades in a short period of time means than investors are exposing themselves to significant risk by swing trading stocks. For that reason, paper trading can be a good way to hone strategies before actually proceeding with an actual account. Paper trading allows investors to set up simulated accounts on websites and make trades using real stocks. As the stocks that they buy and sell rise and fall, their simulated accounts will reflect their level of trading acumen.

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Once investors feel they are prepared to start swing trading stocks for real, they should be on the watch for stocks that have significant price volatility. A stock that tends to trade at or near the same level day in and day out may be worthwhile to hold for a long-term investor, but it holds little value for investors trying to get in and out of positions quickly. By contrast, stocks that show a lot of rapid up-and-down movement on price charts should be the target of swing traders, who can make big profits on such stocks if they can time those price movements well.

Inserting stops into each of the trades they make can help investors mitigate the risk involved with swing trading stocks. A stop is the point at which an investor will bail out of a position if the price moves in the opposite direction of where he desires it to go. Investors should put stop levels at a point where they can tolerate losses and be prepared to stick with those stops to keep their losses from getting out of hand.

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