Swing trading is the method of investing where you buy a stock at a lower price than it normally trades. On these occasions you hope the stock will appreciate and trade higher soon but as the stock rises to meet the higher price, this often causes a rise in the stock’s price, thereby causing a loss in purchasing power.
In addition, on these occasions, you are also hoping that you would have bought the same stock earlier and would have enjoyed a huge increase in future purchases.
The principle of using the market as a gauge
When a trader uses the market on a regular basis, the principle is based on the market price of the stock. The same stock will therefore trade in a different price on every occasion. As the stock increases or falls in price, the trader may also be able to buy that new stock at the new low of a lower price. The difference between these occasions and everyday price fluctuation is called the swing – the swings will be small, but they must happen at random to avoid losing money. You have to be prepared for the price of your stock to rise when it is low, and rise when it is high or vice versa. That means that it is important to pay attention to the daily swings so that you do not get in over your head buying and selling at the wrong time.
A trader that is looking for an asset and not interested in a particular trade will want to wait for a swing before making a new trade. But, if you are interested in an asset, you will want to do a new trade very soon – you must try that asset out immediately before the price of your present stock falls and you make a new trade.
The market is a complex system of financial transactions. It is divided up into many sectors and is made up of various markets that trade with each other.
There are 2 separate areas – that’s the stock market and that’s futures markets – and there are many different areas – the bond, insurance and interest rate trading, the commodity, and much more. There is nothing wrong with any one part of it – but what is important is the order in which these trades are executed.
The main market
The main market for the stock market – or other products – is called the futures market. The difference between this market and the more familiar equity market is that the derivatives, or commodities, market is the more concentrated market.
This is because futures contracts are not traded over a public market but over the privately owned