Swing Trading - Learn to Trade Short-Term to Boost Your
Swing Trading is an approach to stock
market trading that uses short-term price movements
as the basis for your stock trading system.
Technical Analysis is based on the
idea that patterns recur in the price activity of
By charting the share price, we can
identify these patterns as they begin to appear and get a
good indication of the likely future direction of
One of the technical analyst's most basic
tools is the trendline
Trendlines are straight lines drawn on the share
price chart to give a clear visual picture of the
dominant trend of the price.
Down trendlines join two or more peaks
in the share price. As long as the down trendline is unbroken,
we can conclude that the down trend is still in effect.
Up trendlines are, of course, just the
opposite. They join troughs in the share price. Again,
the trend can be assumed to still be in effect until the
up trendline is broken.
What about share prices going sideways?
Well, there is a kind of a horizontal
trendline the support / resistance line
Support and resistance lines are horizontal
lines marking prices where the trend of the stock price has
Support lines join troughs
they support the price like a floor, preventing it from falling
Resistance lines join peaks they mark
a price where there is market resistance to the price climbing
Eventually, of course, all trendlines
When the price is confined between lines
of support and resistance, it's called a trading range.
Trading ranges can offer great opportunities for share
traders! Once we've identified the trading range, we can
buy near the bottom of the range (once we've
confirmed that the price has indeed bounced back off
the support line, and not broken through it). And then sell
at the top of the range. It's possible to do this
several times in the same trading range, making respectable
profits out of a share that's essentially going sideways!
The Joy of Trading Ranges
To illustrate, consider this chart of Lihir
Incredibly, LHG went from a price of $2.80 per
share to $3.10 per share
no less than SEVEN times
in less than a year! That's a rise of 30c per share (or over
10%). Doing that seven times in a year equates to a rise
of 7 x 30c = $2.10
or 75% !
That's a potential profit of 75% for the year
on a share that seems to be going sideways.
Now, this is just a simplified illustration
we couldn't possibly have foreseen every one of these
opportunities but it demonstrates the potential
profits that are available to short term traders
and unavailable to long term investors who
buy, hold and forget about their shares, hoping
that they will appreciate in value over the long term.
The Biggest Mistake People Make Investing in the Stock Market
Profiting from trading ranges and other
market patterns is only possible by charting
the share price and keeping track of what's going on.
Most investors unfortunately let others
do their thinking for them, and fall prey to market sentiment
in other words, fear and greed.
When the market is buoyant and prices are at
all times highs, the media publicises the great gains to
be made in the stock market
and people jump in and
When prices plummet and the news surrounding
the market is all doom and gloom
people panic and sell
This leads to buying high and selling
not a great strategy.
Of course, the best time to buy is when
prices are low
exactly the time when most people
hesitate to put money into the market.
To be successful at trading shares, we need
to learn to be dispassionate in our approach to the
market to resist the emotions of fear (at lows)
and greed (at highs).
Create your own charts and learn to apply
your own swing trading analysis to them. Charts
and trendlines don't lie and they don't get emotional
they just present facts.
Market Guide to Using Leveraged Equities to Double Your
introduces the power of LEVERAGE with a warning!