Module 3

What is unsystematic risk?

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Swing Trading

Swing Trading

Swing trading is another investment strategy that is short term in nature. It differs from day trading because traders are holding their positions over a longer period of time. Typically for anything from a few days to several months. 


Swing trading is still a high-risk investment strategy, but is safer than day trading, as investors give more time for their investments to perform.


Generally, the longer that investments are held, the more likely that an investor will achieve their desired return. Anything can happen in the short term, especially if investments are held for just one day. 

How swing traders make money

Swing trading is usually the investment strategy that most people think of when it comes to the stock market. This is the case because it involves buying low and selling high. 


Investors that follow swing trading are attempting to buy a stock when it is priced unusually low, waiting for it to swing up to a more reasonable price for the stock. They are trying to take advantage of anomalies in stock prices or of short term news that has temporarily reduced the value of the stock. Both of these situations usually happen when other investors are emotional and over-estimate the impact that something will have on the future of a company. If the price of a stock goes down to low enough levels, swing traders are generally a significant part of what drives the stock price back up to ‘normal’ levels. 


The hardest part of swing trading is timing. If a swing trader buys or sells a stock too early, it can reduce their return dramatically. Therefore, good swing traders have patience and try to control the decisions that they make by observing events as they unfold.

Are day trading or swing trading worthwhile?

Whether day trading or swing trading are suitable for you, depends on your investment goals, level of skill and tolerance for risk.


The benefit of day trading and swing trading is that they provide investors with the opportunity to make a lot of money in the short term. With that said, investing is typically less stable in the short term, making them both high-risk strategies.


Despite the upside of potentially making money in the short term, both day trading and swing trading are generally not suitable for most individuals. This is because both strategies are time-consuming, highly stressful and require quite a lot of money to be invested, in order to achieve decent results.  Long term investment strategies are typically more straightforward for most people, as they can simply invest their money and do nothing more. For that reason, long term investing is typically less stressful, with investors giving their investments more time to reach the level that they want.


Day trading and swing trading are discussed a lot as they suit the human characteristic of wanting to get rich as quickly as possible. However, both strategies are tough and do not suit most people. So, before deciding to give day trading or swing trading a go, think about how suitable they are for you. If anything, perhaps try them with a smaller amount of money, to see how you get on with them.

How long do swing traders hold stocks for?

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