David Young
Dec 3, 2014 · 3 min read

Pros And Cons Of Swing Trading Penny Stocks

Swing trading is the trading strategy which tries to gain the maximum profits in stocks within 1 to 4 days by-holding a trade able asset the whole time. Swing traders usually aim to find-out extraordinary potential stocks which move in a short time and they make gains or profit by trading them. They’re not interested in intrinsic value of stocks instead they pay keen attention to the price trends, direction of market trends and patterns. They typically make use of the technical analysis so as to explore the stocks that have a short-term price momentum.

Swing trading is popularly used by the day traders or individual traders. Large institutions can’t swing trade since they deal in the big stocks and quick trading for them isn’t possible. However, individual traders are able to swing trade quite easily without competition from the larger institutions. The ultimate goal for the traders is to buy instruments in direction of market trends and gains. The best swing trading strategies are basically those the traders can implement for highest possible financial gain. Swing traders make profit by either short-selling or buying an asset.

Pros

There are many advantages of swing trading over the other kinds of trading. The anticipated returns normally tend to be much higher than what buy and hold investors would expect, thus making swing trading the ideal way of “trading for a living”. That’s especially true whenever one considers income from swing trading is available on monthly basis because of the relatively high turn-over rate. For example one can, trade 2 weeks for income so as to pay his/her monthly bills and then 2 more weeks in order to compound his/her trading account. However, like all other types of trading, swing trading is susceptible to the market fluctuations and cycles. While someone can do swing trading for living, he/she needs to be much careful and set aside some funds during those good months so as to have some money available in order to pay the monthly bills during lean months.

If executed properly, however, a swing trader experiences much less risks than long term players. Investors are basically forced to ride the bear markets in to ground, anxiously watching their net worth slowly slip away as indices grind down day after day. But the swing traders have freedom to simply just exit the losing trades and step aside.

Cons

• It does not offer same leverage as the day trading.

• Your capital gets tied up much longer when swing trading.

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