SHARETIPSINFO >> Articles Directory >>When to Adopt a Swing Trading Strategy while trading in Indian stock market
The stock market goes through different phases at different times. As trader you need to have the flexibility to adapt to those prevailing trends in the market so that you can keep earning profit irrespective of the general market trend. For example, when the market is moving upwards in leaps and bounds you can make long term investments to increase the bottom line of your capital. If the market is showing frequent movement within a particular range you can benefit from daily trading and short selling methods. But what if the market as whole is stable and the stocks you are considering is showing long term trends? It is the most suitable time to switch to swing trading strategy to get a regular steady income from your stock market investment. Basically swing trading is an intermediate way between long term investment and short term investment.
Swing trading is a specific form of trading where you can benefit from the short term investment in a long term trend of the stock. Like the overall market trends individual stocks also goes through the cyclic way of ups and downs over a period of time. For a certain time a particular stock keeps rising in the market than it gets stabilized and then starts to fall and then after a specific time it suddenly shows an upward trend. This is a typical cycle that most of the stocks go through. The strategy of swing trading is based on this long term trend of the stocks. As a swing trader you have to identify the specific time when the stock is about to a take an upward trend within a cyclic movement. You need to invest in that stock at that very moment and benefit from the potential rise and make good profit within a few days of time. This is a specific style of trading where speculations are made on long term trend of the stock to make short term investment.
Like any other form of stock market trading in swing trading as well you have to choose the right stocks for investment and make out which is the best time to invest in the stocks. The success of swing trading is primarily based on the time at which you should invest in the stock. Ideally you should invest in an up market stock that is about to show a reverse trend and get an up ward trend in the price movement. This timing is the most important aspect of swing trading and your success depends solely on this. To flawlessly predict the time when a stock is about to rise in price you have to keep a close watch on the stocks that are showing a long time trend at the market and have a strong fundamental basis.
The easiest way to locate the stocks that are about to see an up trend in the market is to first determine which stocks are being traded at a price that is not too high or low and having a moderately good trading volume. Then you need two different parameters – the 10 day moving average and the 20 day simple moving average of the stock. Once you have the information you have to consider if the closing price is higher than the 10 day moving average. If you find that the 10 day moving average is lower than the closing price then you have to compare the 10 day moving average with the 20 day simple moving average. If the 10 day moving average is higher than the 20 day simple moving average you can say that the stock is seeing an up trend and it is the perfect time for the swing trading of this stock. Of course you can get the optimum time and price range for investing in this stock for swing trading once you do the technical analysis of the stock.
Once you have found out the right stocks and the determined the right time to invest in the stock for swing trading, even then you should not invest your entire fund in the stock at one go. Ideally you should invest about 40% of your fund initially and then wait and watch the trend of the stock. If the stock is still on an up ward trend you can invest the rest and expect a good return.
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