So, you may have a basic idea of what swing trades are, but how do they work? To continue our look into swing trading, we shall examine how you can participate in it.
Starting to swing
So, when it comes to swing trading, the key concept should be the trend. In short, you want to figure out what the trend the market is in. This means the direction the market is going in. So, the general sentiment can be positive, resulting in prices going up. Negative sentiment means prices go down. In terms of trends, an uptrend goes, well, up, and the downtrend down. There is also the possibility of a sideways trend, so stocks just stay stable. Of course, this means no profits or losses from stocks either.
The general positive sentiment is also a bullish trend. Asset values are going up and people have faith in this continuing energetically. A negative sentiment would be a bearish trend., things are slowing down.
There are two options on how to deal with an asset as well. If you go long, you want to profit from the rise in the asset value. Therefore, you want to buy it low and sell it higher. This is what someone should do during a bullish trend.
Shorting is the opposite. It means you believe prices are going to go down, or that there is a bullish trend. What traders here do is borrow shares, and then they sell them. Then, when they are at a lower price, they will buy them again. Then they can return the shares to whichever lender they had it from. So, now, they keep the difference of the initial sale from the price they bought it for later on.
How do you predict these trends then? Fundamental analysis is the key. You need to look at financial statements, how companies work, and economic factors. These will help you decide how things will turn out.