A swing trader knows that money changes hands much more rapidly (and over much longer time periods) in the stock market than it does in almost any financial market, including real estate. Investors do not understand that, even if they can see a stock price movement, to them it is just going up and down, up and down, not rising up and falling down. The main reason those investors have stopped their buying is simple: they are losing money. A swing trader knows, too, that if they buy a stock that is rising at a high rate of return, they risk not making money the following business day, not making any money the following week or three, and they will be better off selling their stock than keeping it. If a business that is rising in price loses most of its value, it’s usually because of a poor management team and there’s very little that can be done about it. In any event, there is very little that a trade can do, if it tries to do anything at all, besides try to make more money. You’re either there already, or you’re not.
What are swings?
A regular investor makes his or her choices based on what is going on in the market and what’s likely to happen in the future. A swing trader, though, makes his or her decisions based on what he or she perceives the potential returns on the positions to be going to be. This is where the difference often lies: a swing trader will have a clear understanding of what the market is likely to do, and will choose a position with a lower probability than would be expected for a market of the same level. An average investor on a regular basis will make his or her decision based on what’s going on in the market, but with very low probabilities that that will be expected, such as buying a stock on opening day and holding it for three to four days. A swing operator on the other hand, is very optimistic on the market and can easily become upset about one or even several things the market doesn’t like.
The average investor or trader, if he or she tries to make a trade, is bound to have several errors. There is no way around this fact, nor is there any shortcut around it. An average trader knows not just how long a trade is going to take, but also how much the trade value is going to change after the trade has been made. For example, when a trader makes a trade, he or she may decide that a large change of opinion might
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