Online swing trading, which financial pros identify as a very short-term trading strategy, carries with it an extreme potential for risk and loss of capital. Most of the best and most applicable advice for online swing trading relates to avoiding some of the biggest risks that could be involved in this kind of trading. This is commonly referred to as “timing the market.”
Those who are involved in online swing trading should make sure that they understand the brokerage software that they are using. Investors need to get access to the best tools, such as limit orders and stop losses, as well as background research resources like candlestick charting. They also need to practice with smaller trades until they understand how their transactions are being placed, whether there is a lag time, and other key considerations for timing trades.
Some of the best advice for online swing trading relates to expectations for this short-term financial play. Experts recommend keeping a lot of cash in reserve. Beginners should avoid buying “on margin” when they can’t pay up for any losses that occur. Keeping more cash on the sidelines can be the best way to take on this type of trading without risking too much.
Other financial professionals recommend that online swing trading beginners do “paper trading” first. This means recording proposed trades to see how much gain or loss would occur. The idea is that after doing a whole lot of paper trading, the more experienced trader “graduates” to actual transactions. This is a good strategy, however, it does not really help traders get around the inherent risks of swing trading.
In addition to the above tips, experienced short-term traders have their own tricks of the trade when it comes to making money quickly. Some rely on advanced algorithms or savvy inspection of real markets. Others use a kind of aggregate approach, clipping off small bits of gains, and then getting out of expensive long positions.
It’s important to understand that none of these tactics will make online swing trading into a sure thing. One of the best things that swing traders can do is to be realistic about expectations: although it may seem mathematically possible to make 10%, 15% or more doing this, the reality, according to many experts, is that the majority of traders actually lose money over time. As surprising as that may be, those who wade into this dangerous financial territory might get a better understanding of why so many swing traders don’t break even over time.