I have a confession to make. For the past six months, I have been buying and selling stocks at a rapid rate lately. It haven’t been day trading, but I haven’t held a stock for more than a week before selling it. I’ve been swing trading.
I have been swing trading with a small portion of my investment portfolio. I have been buying and selling stock and holding shares for only a few days in the hopes of short term price movements.
And, I am really loving it I have to admit. Like when I started playing fantasy baseball and it renewed my love for the game, short term stock trading has renewed my love for trading.
It’s not for everyone. I will readily admit that. And, I only trade with a very small portion of my total investment portfolio, less than 5%. But, it has been a profitable venture and a lot of fun. I’m up over 20% in the past six months.
What Is Swing Trading?
Swing trading is a speculative investment in individual stocks where the shares are held for only between one to five days. It is very rare that swing traders hold investments for more than a week.
Swing traders look to profit from a stock’s price changes or swings. A swing trading position in a stock or multiple stocks is typically held longer than a day trader would flip stocks but much shorter than your typical buy and hold investor which can hold stocks for months, years, or maybe never sell a share.
Investors who practice swing trading use technical analysis instead of financial analysis to find the potential short term price movements and momentum of stocks they are targeting.
Swing traders are in and out of stocks so rapidly over the course of a few days that they do not typically care about the company’s overall fundamental or intrinsic value of the stock’s shares like a traditional investor who is looking for growth or value stocks to invest in for the long term. Swing traders are looking for share price trends and patterns in the stock charts.
This is rather similar to trading stock CFDs (Contracts for difference), when the trader is also preoccupied mainly with price movements and not the intrinsic value of the underlying asset.
Where To Find Stocks To Trade
For the past six months, I have been using Jason Bond’s Swing Trading service. It is an investment newsletter, and it is the first one that I actually took the plunge and signed up for. I have to admit that I couldn’t be happier.
A friend initially recommended his service, and I decided to give it a try. Now I’m hooked on his newsletter, text alerts, and website for my daily stock trading.
These services are centered around education, teaching new and experienced investors alike how to read technicals and trade stocks based on short term momentum and price movements. Jason is a former teacher with a knack for breaking down concepts and teaching while you follow his stock picking.
While he doesn’t recommend specific stocks per se, he opens up his portfolio to you and alerts clients to trades in real time through his website, emails, chat room, and text message alerts when he is buying and selling a stock.
I was very hesitant at first to sign up for a stock newsletter service on the internet. I had dabbled briefly years ago with Jim Cramer’s Action Alert PLUS. But, I am so glad that signed up for Jason Bond’s Swing Trade service. It has been great.
So far I’ve made over 20% return in six months investing in companies like Zynga, GEVO, GLUU, OCZ, and many other small cap stocks.
Another good swing trading service is K Capital Advisors. Like Jason Bond, K Capital Advisors produce a real-time email newsletter and text service that lets you follow along with their experts as they trade stocks over a short period of time. Become a Successful Swing Trader – K Capital Advisors
Lessons Learned Swing Trading In Six Months
Like all traders, I have had my ups and downs. I’ve had to hold a few stocks for over a week to earn the rate of return that I was looking for. I have also had to sell a few stocks for a loss.
But, that has been the vast minority of the stocks that I’ve been swing trading these past few months. I would be remiss if I didn’t share with you a few lessons that I have learned along the way of short term swing trading.
Invest Only A Small Portion – Swing trading or any short term trading should only be used with a small portion of your investment nest egg and not with retirement funds. I am only investing in a small 5% portion of my entire portfolio. This will limit the damage if things go completely south.
The vast majority of my investments and retirement funds are in index funds, mutual funds, DRIPs, Roth IRAs, and my company’s 401k retirement plan. Don’t make swing trades with money that you can’t afford to lose.
Have A Goal And An Exit Strategy – As with all investing, you have to have an idea of what you are looking for in the end, and swing trading is no different. Why are you investing? What do you want to earn? 10%? 20%?
You have to know your exit point before you even start to trade. Additionally, to having an exit strategy, you also have to set a stop on how much money you want to lose in any one trade if your shares should take a turn for the worst. Setting a stop to trigger a sell after a 5% or 10% decline can help you limit the amount of money you can lose in a single trade.
Small Investments At A Time – I have finally increased the amount of investment to where I purchase shares in 1,000 share blocks instead of round lots of 100 shares. That’s a little easier when I’m investing in very small cap stocks with share prices of $5 or less and market capitalizations of under $1 billion.
But, like my Lending Club loan notes where I only invest $25 in each Lending Club loan, I only invest a few thousand dollars at a time in any one swing trade investment. This again limits my downside potential.
It Takes Patience – Swing trading and short term stock trading takes patience. You have to have a goal or an idea of why you are buying your stocks, and you have to have a goal on when you want to sell them. It may take some time, even more than a week, to see if your plan will pan out. You have to have patience with swing trading.
Short term stock trading is not for everyone. And, it is not for your entire portfolio. In fact, I’m still a very firm believer in buy and hold for long term investing goals like retirement, children’s college funds, home mortgage down payments, and the like.
But, short term stock trading with a small portion of your overall investment portfolio can be a fun and very profitable venture to keep you engaged and renew your love for investing. It allows me to put short term cash investments to good use.
Have you dabbled in short term stock trading? Are you a fundamental investor or do you love technical analysis? I’d love to hear your thought in the comment section below.
Note: Some of the links listed above contain affiliate links where I’ll receive compensation if you choose to use any of these services. I’ve personally used all of the service listed on this page and can attest to their performance. I definitely recommend them all.