Just what is a swing trader? Swing traders hold positions over several days and sometimes for a few weeks. The goal of swing trading is to profit from short but powerful moves.
Swing trading differs from the buy-and-hold approach to investing. Long-term investors may hold a security through periods of weakness — lasting weeks, months, or even years — figuring that the tide will eventually turn and their investment thesis will be proven correct. Swing traders don’t care for such poor performance in the near term. If a security’s price is performing poorly, swing traders exit first and ask questions later.
I wish I could tell you that swing trading is fast and easy and leads to overnight profits that will make you an instant millionaire. Perhaps you have seen ads about a quick path to profits by following a “proven” or “secret” system. Or maybe you’ve seen a “news story” of an elementary school teacher that became a millionaire trading stocks during her lunch break. These ads and stories are alluring — people really want to believe them.
But I’m afraid the reality is there are no sure-fire ways to instant riches. Swing trading is no different; it won’t turn you into a millionaire overnight. Period. Anyone who tells you different is either lying, doesn’t know, or has something to sell you. As a beginner in swing trading, you’ll likely lose money for a period until you master the ropes and apply the information in this book and other resources. I remember reading several books before I started trading, convinced I could begin as an expert. But I lost money for a period, rediscovering lessons found in the very books I read. There are few teachers better than the pain of losing money.
As you improve, you can expect to achieve investment performance in-line with the overall market and possibly above it. If you reach an advanced level of swing trading, then you may be able to generate 15 to 20 percent annually over time. If that number doesn’t impress you, it may be because you’re underestimating the powerful force of compound returns: a $10,000 investment growing 20 percent each year will reach more than $383,000 after 20 years — in other words, 38 times your money. One of the most successful investors of all time, Warren Buffett, generated annual returns of about 21 percent over more than 50 years of investing.
In Swing Trading For Dummies, Second Edition, I introduce you to the strategies and techniques of the swing trader. Moreover, I cover topics given short shrift in some trading textbooks — topics that largely determine your swing trading success. For example, whereas many textbooks focus on chart patterns and technical indicators, this book goes one step further to cover the importance of money management, journal keeping, and strategy planning. Although these subjects are less glamorous than looking at charts, they’re actually more important — because even exceedingly skilled chart readers will fail if they devise a flawed system, take unnecessary risks, and don’t learn from their mistakes.
Here are some of the subjects this second edition covers:
Charts and figures used in this book have text next to them explaining the essential point the figure conveys. These captions make it easy to skip to different charts and take away the critical point made in each one.
I made several assumptions about you when I was writing this book. I’m assuming that you
I use icons throughout the book to highlight certain points. Here’s what each one means:
Like all For Dummies books, this book is modular in format. That means you can skip around to different chapters and focus on what’s most relevant to you. Here’s my recommendation on how best to use this book depending on your skill level:
If you’re not sure where to start, flip through the Table of Contents or Index for a topic that piques your interest. For additional information you can access on a regular basis, check out the Cheat Sheet at