Swing traders are traders and investors who hold positions over a period of several days, weeks, or even months to profit from anticipated price moves in the short or medium term. The goal here is to use technical analysis to identify stocks whose prices may go up within the coming days to months. Here's how swing trade differs from day trading and buy-and-hold strategies:
- Day traders start trading as soon as the stock exchanges open – and they aim to have all of their positions closed by the end of the day. Day traders do not carry over positions to the next day, instead they try to make the most out of price changes that occur over the course of each day.
- Swing traders buy and sell stock based on anticipated market trends and stock price changes. These changes may occur over the course of days, weeks, or months, and the trader will hold their positions until the price goes down again; usually significantly enough to signal that the overall trend in price change is now no longer favorable.
- Traders using buy-and-hold strategies buy stocks and hold them over the course of years or even decades. This allows them to ride out short-term price fluctuations. The goal: being able to sell the stock at a much increased price in the far future.
In short, swing trading means trading stocks over a time frame that's longer than day trading and shorter than buy-and-hold. This strategy is intended to generate larger rewards than day trading (as price moves usually aren't very significant over the course of just one day) while also limiting the amount of time you'll need to spend actively trading (as day trading requires near-constant attention). Yet, swing trading isn't as hands-off as most buy-and-hold strategies – but then again, putting all your money into illiquid long-term investments that won't pay out for decades just isn't feasible for many investors.
Keep in mind that holding stock over several days, weeks or months opens you up to the risk of the stock price going down between the end of one trading day and the start of the next. Risk management becomes more important the longer you hold a position.
Typically, swing traders use technical analysis to identify potential price shifts in the near future. These analyses allow them to identify points in time when they can purchase the stock at the best possible price and points to when they can sell the stock to maximize their returns before stock prices start stagnating or going down.
Swing traders also use stop-loss orders to automatically sell their stock if the price doesn't move as anticipated, thereby limiting any loss incurred. However, discipline is crucial for swing traders since some fluctuation in terms of stock prices is to be expected due to volatility. In other words: similar to your typical buy-and-hold approach, you can ride out some price drops if your time horizon is large enough.
Depending on the quality of their analyses, swing trading can generate significant returns at a manageable risk while only requiring you to take a look at the market once or twice every week. However, your gains are limited by price changes that occur over a few weeks or months. These are typically not on par with the gains you can make by investing in alternative investment vehicles such as CARL's quants. You'll also need the proper tools and the knowledge of the market necessary for swing trading, as this investment strategy relies on technical analysis to anticipate future price shifts.
You can limit the amount of time and money you spend on analysis by subscribing to swing trading alert services. However, these aren't cheap, and they are used by a multitude of investors – which means you'll just end up following the herd instead of beating the market.
In short: While you can make money with swing trading, it takes a non-negligible amount of time, effort and resources to do so – and there are other options available that generate even greater returns at a fraction of the cost.
If all you want to do is trade stock, swing trading may be a good compromise between long-term buy-and-hold strategies and short-term day trading. But as we've seen, as a private investor, you're better off looking into other investments if you're aiming to maximize your gains. CARL believes that buying and selling stock alone isn't enough to counteract the effects of inflation and to give you enough additional returns to help you grow your wealth. To do this, you need to expand into alternative investments like the quantitative hedge fund strategies available at CARL.
There are plenty of benefits associated with investing in CARL's quants instead of getting into swing trading yourself:
- While hedge funds are free to trade stock using swing trading strategies, they aren't limited to it. For example, they can also use long and short positions to minimize the risk they're exposed to or invest in anything from private equity to real estate. This makes their portfolios significantly more diversified and thus less risky.
- Quantitative hedge funds use quantitative analysis, which offers similar benefits to the technical analysis that is used by swing traders – they're both data-driven and thus less prone to human error.
- Investing in a hedge fund, all the day-to-day trading is done for you – you don't need to lift a finger or have an eye on the market 24/7.
What's more, CARL can give you easy access to some of the most sophisticated hedge funds strategies available today, while swing trading will cost you time and money, with returns significantly lower than the 15%+ targeted returns of CARL's quants. And some of our quants also invest in the stock market using swing trading strategies as part of their investment portfolios. So if you're determined to make money from stocks, you can still do that with CARL – only more efficiently, quickly and easily.
If you're an accredited investor, you're eligible for a CARL account. CARL's mission is to put the power of quants in the hands of private investors – so forget about spending time trying to get the most out of the stock market: At 15%+ targeted returns and a minimum investment level of only $20,000, CARL's quants are the better option by a significant margin. And since our quants have no lock-up periods, your investment is also highly liquid. Set up your CARL account today and use our convenient mobile app to get into quantitative hedge funds today – it's never been this easy to benefit from one of the most profitable investment vehicles available today.