How to use swing trading to exploit a hyped-up retail marketplace
Despite soaring from below $10,000 to above $30,000 at the beginning of the year, Bitcoin feels like yesterday’s news. As 2021 grows one month older, the only subject anyone wants to talk about is the insanity behind the GameStop and AMC price explosions.
While the retail craze will eventually settle, the momentum behind the world’s most popular cryptocurrency has shown no signs of slowing down. And some savvy investors such as Ryan Hasson have begun to take advantage of a market that is becoming increasingly more volatile by the day.
Five years ago, Ryan Hasson was in South Africa finishing a six-month training session. Today, he is a senior trader at Kershner Trading Group/SMB Capital. And the swing technique has become his specialty. He describes his methods on the podcast Chat with Traders, and those will be summarized below.
What Is Swing Trading?
Swing trading is a technique used by active traders that trims the fat off the short to medium-term gains of a stock over a stretch of time. On the podcast, Hasson mentions that swing trading is all about weighing risks, rewards, and the probabilities of both happening on any given trade. The idea in swing trading is that you can maximize your potential value while minimizing your potential risk if you identify the right opportunities.
Identifying these opportunities and when to strike differentiates the professionals from the amateurs when it comes to swing trading. To discover the right time to enter and exit a market, swing traders use technical analysis to supplement more fundamental analysis, such as price trends.
Executing a Swing Trade
The goal of a swing trade is to capture the value of a sudden price move in a stock. An extreme example of how this can be accomplished has played out in the market recently, as GameStop and AMC stock have increased exponentially in value due to various external factors. Any swing trader able to anticipate the swirling winds behind those soaring stock prices could quickly capture an incredible amount of value.
A swing trade means holding a stock position for more than one trading session, but not for longer than a couple of weeks. The individual investor ultimately defines the timeframe of a swing trade. But the idea is to enter the market on one side of a swing and exit on the other.
Difference Between Swing Trading and Day Trading
There are active investors, and then there are investors that typically buy and hold for the long-term. Among the active investors, there are two primary segments: day traders and swing traders.
Both day traders and swing traders use technical analysis to execute their strategies. But swing traders look at a stock’s trajectory on a more macro level, compared to the microscopic attention a day trader must place on any move.
Swing Trading Strategy: How to Find Swing Trade Opportunities
To win at swing trading, stay humble, and don’t get too greedy. Enter a market, take your profits, and move on to the next market. In the podcast, Hasson mentions a few different ways to identify swing trade opportunities:
Tracker Trader Conversations
Tracking a trader’s conversation is easier said than done. But you can find trader chatter online on forums and Reddit, to name the low-hanging fruit. Understanding where markets are trending can be especially helpful when actively trading in a market that is becoming more volatile by the day.
Twitter has become a microphone for the masses, and today more than ever, small internet armies can move markets. Monitoring Twitter can quickly give you a general sense of public sentiment on a stock.
Have a Plan For Increasing Your Position
The bigger your position, the higher your potential profits, but to increase your position, it’s helpful to have an advanced plan in place to ensure you can make a timely trade.
Here’s what Ryan Hasson is paying attention to in the market:
- Is an entire sector performing well, or just a select few names?
- When volume increases, does it increase for the entire sector?
- If the stock has undergone a wild swing in the past, how high or low did it go? How long did it last?
- Try to identify when others are taking a position.
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