The term “swing trading” comes from the fact that a small movement in a small market can have more than a large movement in the larger market. That is, sometimes the small movement can cause the larger swing to be short-lived, and sometimes it can cause the swing to be long-lived. This is what makes it so exciting: You have two ways to see how the market is changing — and potentially long-lasting.
Before we go any further, though, we should understand some key terms in trade terminology. It’s useful to know that a swing is often short-lived, and an immediate short-term move can lead to a larger long-term move. This helps avoid the temptation to sell your position in a panic when the market suddenly drops.
You buy your position when the market becomes more attractive and then sell when the market makes a move that’s more likely to make you a bigger winner.
You hold your position while the market is getting smaller and before it ever becomes more attractive.
You sell your position when a bigger movement begins.
This means, if you had a lot of money, you might need to hold your position in a hot market for a long time — but there’s a trade you can make if you don’t need to hold it as long.
“Long-term” is often taken to mean years, but really it stands for “long-term gain.” If you hold a market position for a long time, there’s a chance it will become more valuable as the market becomes more attractive and more volatile.
How do I choose a market position?
A lot of traders think about which markets they will invest and trade. These are generally the stocks they like best, and they use those stocks as a basis for their strategy.
However, the best trades are often trades that haven’t been done yet, and even then, it doesn’t always take a long-term view of what the markets will look like after the trade. For example, you won’t be betting that Facebook will be the next Facebook, but you could be betting that Facebook in a year will sell at $200.
So what about long-term gains, which are the ones you can put a stake in? For this one, I refer to two things: the time from when you started your trade, and the time to start selling your position.
The time to start your trade
There’s nothing wrong with starting an
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