Swing Trading


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	------------------------------------------------------- Strategies ------------------------------------------------------- Swing Trading Generally, there are three categories of traders. To contrast a swing trader and the research of whentoby.com we will present a brief definition of all three. They are: Long Trader – creates a portfolio of stocks balancing personal financial goals with asset allocation strategies. Stocks are acquired and held in an account for at least one year. At the end of each year the portfolio performance is reviewed and changes are made to individual stocks within the portfolio. Day Trader – by strict definition, the day trader buys stocks each day and sells all shares of those stocks before the close of each day. The day trader does not own any positions at the close of each day. Swing Trader – studies stock prices and identifies cycles or swings in prices. A cycle could span multiple days, weeks or even months. But, a swing trader does not hold stocks for the long term. The classification of traders has nothing to do with how stocks are selected in each of the portfolios. Fundamental analysis involves examining the financial performance of a company looking at the company’s financial statements and performing statistical analysis on items such as price earnings ratio, book value, etc. Technical analysis involves examining historical trends in a company’s stock price. Books have been written about each type of analysis so there is much more information for the serious student to learn. A Long Trader typically uses fundamental analysis to select stocks to buy. A Day Trader typically uses a combination of fundamental and technical analysis. A Swing Trader uses Technical Analysis only to select stocks to buy. Whentobuy.com could be classified as a company specializing in producing research for the Swing Trader using technical analysis only. Identifying patterns or cycles that a stock moves in requires analysis of the stock’s price over time. Once a stock price is analyzed you will notice that price is not random, price anticipates fundamental change and that the relationship between price and time is linear. In our new Digital Economy investors now have access to the same information that professional traders and portfolio managers have had. A few short years ago investors taking advantage of swing trading typically spent their day in the brokers office watching the stock tickers. Today, we can do this from our desktop computer or from Web TV connections. Additionally, the tools available today and the information access are better, faster and more accurate than ever before. This is not a new concept, technology has just made it available to more people! People that are currently retired grew up in an era where trust was placed in a financial planner or a stockbroker to manage portfolios. These professionals would purchase stocks for the long term hoping they would increase in value. People who are retired today and living off of those portfolios are fearful of making changes. Institutional investors (i.e., banks, insurance companies, mutual funds, etc.) are limited in their ability to buy and sell stocks using swing trading. This limitation in some regards is self-imposed. Another reason it is very difficult if not impossible for an intuitional investor to move large blocks of stock. If an intuitional investor were to attempt to sell 50,000 shares of any one company, can you imagine what would happen to that companies stock price? For this reason once an intuitional investor decides to purchase or sell a stock it is done slowly over time. While this is a disadvantage to the intuitional investor it is a benefit for the swing trader! Brokerage firms do not let their brokers participate in swing trading largely because of the commissions they charge. First, the brokers clients often times complain that the broker is simply “mining” for commissions at their expense. Second, the commission structure works against the brokers making money following a swing trade. A brokerage firm that charges $180 for a market order creates a buy that requires $360 in upward movement just to break even. Investing $5,000 in a $20.00 stock buys 250 shares. That stock must move up $1.44 per share or to $21.44 just to pay for the commissions. A swing trader would be happy to take a $360 profit from a trade anytime! Range bound, channeling, cycling or price patterns are all terms that describe stocks that are moving sideways. Consider Anadigics, Inc. (symbol ANAD) if this stock was purchased on 8-1-2001 at $17.00 on 12-31-2001 it closed at $15.75. Holding this stock for five months produced a loss of $-1.25 per share. Look at its chart. ANAD does not have a clear trend up or down. But, it has gone through several cycles of moving up and down during the time from August 2001 to December 2001. Close examination of the price cycles shows that ANAD cycles from low to high every 7 days. On its upward move lasting 7 days ANAD historically moves up 25% and on its downward move lasting 7 days it moves down 22%. All this means is while ANAD is not trending up nor trending down you can still make money. Buying and selling the same stock every seven days creates a 25% profit. If you do not like to short sell a stock simply wait seven more days and buy it again. Swing Trading produces small but consistent profits over short periods of time! Want to learn more and make consistent returns? Join now! Back Whentobuy.com and this newsletter are provided for educational purposes only. No statement in the documents should be construed as a recommendation to buy or sell a security or to provide investment advice. It is possible at this or some subsequent time, the editors or staff of whentobuy.com may own, buy or sell securities discussed. All investors should consult a qualified professional before trading in any security. Before trading stocks or options you should understand the risks. In addition, anytime a stock or option is purchased or sold, transaction costs including brokerage fees are at risk. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. \| Swing Trading \| Day Trading \| Significance of Volume \| Daily Gap Cycle \| Overnight Average \| Stop Loss \| \| Range Bound \| Continuation \| Strategies \| Practice Trades \| Performance \| Cancel \| Options \| \| Order Now \| Return Home \| Home Business \| Digital Economy \| Sign In \| Disclaimer \| Training Center \| FAQ \| What's New \| Contact Us \|