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Why Swing Trade?



Investors are attracted to swing trading for several reasons.

First, it offers the possibility of making more profit in the same period of time than just buying and holding a stock. Swing traders take advantage of shorter term gains or losses and by buying and selling at specific times, maximize yield (finance). Second, swing trading as a shorter-term practice driven by expected swings in the price of stocks or other instruments, affords the investor the ability to make money in bull or bear markets since buying and selling occur in both. Third, by carrying out a specific plan driven by chart data and fundamental analysis (see below) rather than pure emotion or market momentum, swing trading offers a concrete way to anticipate what a particular stock will do and therefore what is the most appropriate action to take.

In addition, swing trading generally attempts to enter a position either at support or resistance to maximize the return (finance). As with all short term trading, the inherent risk is usually proportional to the expected return and though swing trading proponents who are experts at swing trading expect consistent returns, this is not guaranteed. The graphic below shows the difference between the total profits accrued by buying and holding 100 shares of Intel with the profits accrued by swing trading 100 shares of the same stock in the same period.

(Note: If using a broker, the cost of the trades themselves will be higher in the swing trading scenario than in the buy and hold scenario.



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