Swing Trading


Active member
Please could someone just give me a brief description and benefits of swing trading.
Absolutely Barmy - I believe you are living upto your name ;)

Hi Dazzam

Swing trading is buying low and selling high. Trying to catch a reversal early and trading it until it turns again. Most swing trades are held for about 3 days as this is apparently a natural swing of a stock (Never seen it myself).

The benefit is it's a more relaxing way to trade than day-trading, and the profits are larger - but then so are the losses.

I'm a swing trader. I buy my stocks as soon as the quarterly reports come out if the financial numbers fit my parameters and the chart shows a predictable pattern. I usually sell in the last month of the quarter unless it's a stock that has a nice pattern that rises and falls with greater frequency. So far this year I have a 20% profit and my father, who got me into the stock market, is at 40%.
This is something I posted at another message board. (Dr. Lecter will recognize it) I'm sharing it here because I think it will answer your question. This is my own, very unorthodox, system of swing trading that works for me at this time. I'm always striving to learn new things and experiment, so next year I may not be trading in this exact manner.

I am a seasonal swing trader. I only buy stocks in the first month of the second and fourth quarter with the intent to sell before the end of that quarter. The reason I do this is because the market tends to drop the most during the September-October months and the March-April months. Recovery tends to be the sharpest after these drops. The things I look for in my short term purchase is...

P/E of less than 15
Debt Equity ratio of 0.3 or less
Net Profit margin of 10% or greater
Return on equity of 10% or greater
Earnings/Share of $1 or more
Whether the insiders are buying or selling (very important)
Chart volatility (I hate flat lines. I like a pattern of rises and falls that are predictable)
There are more things I look at, but those factors are most important to me and the first things I look for when considering a stock. I will not consider any stock that doesn't meet every one of these criteria. After I find stocks that do meet these criteria, I research everything else I can find about them to avoid nasty surprises.

Here's an example of one of my jewels this past year. Please note that I don't hold it now, so I'm not endorsing this stock. This is one I've actually traded several times over the past two years and made thousands of dollars off of it. Take a look at NCEN.
You can see here that it has a P/E of only 5.6.

Now look at it's chart for the past year. I bought 500 shares in October of 2002 and sold them in December of 2002. I purchased 500 shares again in April of 2003 and sold them in June. Each time I made a profit of at least $6 per share. If you look at the financials, you'll see that they correspond with my personal requirements. Their debt/equity is way below 0.3, their net profit and return on equity is way above 10%, their earnings/share is many times more than $1, and the insiders weren't selling until I did.
thanks for your input, I deal in UK shares which report on a 6 monthly basis where as in the States it is a quarterly basis. This board keeps extolling us to trade US shares- one of these days..... :)
I had no idea that reporting was done every six months in the UK. As you can see, I'm from the US and am only familiar with trading in my country. Sorry if I confused anyone.
I feel swing trading has always been around but it is only relatively recently that a name has been given to it. I still think it means a lot of different things to different people.

I tend to trade longer term and trade the trend. However in any trend there are pullbacks to the trendline (simple stuff) and I try and buy during this pullback. This could be described as swing trading but I then hold the stock for as long as the trend upwards (or downwards) stays intact ignoring future pullbacks (definitely not swing trading).

Whatever timescale people trade they try to buy at the lowest, it is the selling which differentiates trading style.

Swing trading is defined as day trading gone wrong.

Like when you do not use stops and fail to cut your losses.

You are then into swing trading.

At least that is what you convince yourself you are into !!