SWING TRADING IS SHORT-TERM INVESTING.

THE DIFFERENCE BETWEEN SWING TRADING AND INVESTING

ADVANTAGES AND DISADVANTAGES OF SWING TRADING COMPARED TO INVESTING.

trade or invest kThe other day I was asked: what is the difference between swing trading and investing? The short answer is: the time horizon. When you invest, you are holding stocks for a longer time period, usually several years. You speculate that “Your share” will increase exponentially in value over the years. As a result, you expect a high return. Dividend payments are often taken in to consideration when investing as they add to the return.

When you swing trade you are taking advantage of short term momentum moves in the stock. Generally you only keep the stock until it reaches its next resistance level, which is normally within a few days or weeks. You are not necessarily interested in the fundamentals of the company however we advise that you only swing trade fundamentally sound stock.

 

PROS AND CONS OF INVESTING

BENEFITS OF INVESTING

To cut it short: This is how Warren Buffett has made his money. He chooses his stocks very carefully and often purchases securities very cheaply, possibly buying when others are panic selling the stock. His financial reserves are always large enough to enable him to wait until the share price recovers and he makes excellent returns.

The great advantage of correct investing is that you can make good returns. Usually you do not need to maintain and manage your account on a regular basis.

DISADVANTAGES OF INVESTING

Sometimes it may take a long time for you to make your return. During this time, your capital is tied up and it cannot work for you. You need patience and sometimes nerves of steel to withstand price fluctuations.

PROS AND CONS OF SWING TRADING

ADVANTAGES OF SWING TRADING

You realise your profit little and often, usually several times in a month. As a result, you are actively involved in the events of the stock exchange and in the world of finance. Swing trading is a strategy that suits the individual trader and not institutional traders as they trade stocks in too high a volume. As an individual trader you can take advantage of the short term price fluctuations in either direction.

DISADVANTAGES OF SWING TRADING

You need to manage your positions and check your account on a more regular basis than with a buy and hold strategy (investing).

BASICS OF SWING TRADING AND INVESTING

There is no right or wrong strategy in the stock market. For the best results you not only buy different stocks in different industries but you chose different strategies as well. We strongly advise you to research the company extensively, so that you know what you are doing. Some basic rules are:

• Study the fundamental data
• Study the charts
• Check the earnings’ and ex dividend dates
• Check the earnings’ dates for companies in the same industry
• Buy the shares with a plan: what is your exit price at the top (profit) or at the bottom (stop loss)?

In the swing trading seminar by Trillium trading Academy you learn all of these things and many more. Thus the main difference between swing trading and investing the time frame, you keep your stock for a longer time period when you invest.


¹ Writing covered call options is a trading strategy of its own. You can learn it in our level 2 seminar.

Education, Fund Management, Shares TRADING OR INVESTING?