Most traders start out on a part-time basis, and that’s not necessarily a bad thing …
Why? Well, for one, you can never rely on steady trading income. So you can’t necessarily count on the fact that you’ll make a certain amount per week or month. Another reason is that it can take time to learn the ways of the market. Starting out on a part-time basis can allow you to take it at your own pace and help prevent burnout.
If you want to try your hand at part-time trading, you might consider swing trading. Swing trading is a moderately paced approach to the market. It often lacks the frenzy of day trading yet doesn’t require the patience of long-term position trading.
In this post, I’ll introduce you to swing trading, including what it is, some general strategies, and how you can potentially use it as a part-time job.
Day Trading vs. Swing Trading
There’s quite a bit of confusion between day trading and swing trading, so let’s clear it up.
While these two types of trading have some similarities, there are some key differences. Let’s discuss:
What Is Day Trading?
Day trading is a style of trading where you enter and exit a position within the same trading day. You might hold a stock for a period of minutes to hours — but not overnight.
Typically, a day trade is executed based on an of-the-moment catalyst that you as a trader believe will have a short-term effect on the stock price. You can take a long position if you believe the price will go up and a short position if you believe the price will go down.
Day trading relies heavily on chart research and finding patterns in a stock’s price action rather than looking at long-term trends.
What Is Swing Trading?
Swing trading is a style of trading where the time frame is generally short but more fluid than day trading.
With swing trading, you might hold a position anywhere from a few days to a few weeks, or in some cases even a few months. It’s less about the timeline and more about allowing a stock to build momentum based on a trend until it reaches a target price range.
With swing trading, you hope to hold on to a stock in hopes of profiting from price changes or “swings” (that’s where this trading style gets its name).
Swing trading is less about trading based on a stock’s chart and more about capitalizing on a trend. However, once swing trades get strong momentum, charts may be used. So in this way, it requires a lot of research about a trend, the sector you’re trading, and plenty of fundamental research in addition to technical analysis.
So, to review, here are some of the key differences between day trading and swing trading:
Timing. With day trading, you enter and exit a position within the same trading day. With swing trading, you might hold a position anywhere from a few days to as long as a few months. While the timeline is definitely short, it’s longer than day trading.
Trend awareness. Day trading really only concerns itself with catalysts and short-time price movements, so day traders rely mostly on news and charts.
Swing trading is more trend aware and requires that you take a long, hard look at trends that could play into the value of a stock. You also want to trade based on a combination of fundamental research and technical analysis.
Advantages of Swing Trading as a Part-Time Job
What makes swing trading as a part-time job so beneficial? Here are some of the many reasons:
Accessible to New Traders
It can be easier for some traders to get the hang of swing trading. The pace is fairly quick, but you’re not moving at the lightning speed of day trading. That can allow you a little more time to think out your process, make a detailed trading plan, and be more calculated in your decision making.
Constant Monitoring of Stock Prices Not Required
With swing trading, the hope is that you find stocks that will move into a target range that you establish over the course of days, weeks, or months.
Once you determine your target range for profits and the maximum loss you’re willing to sustain, you can automate your stock ordering process through limit and stop orders.
That can mean that you don’t have to constantly monitor the movement of your stock’s price. You can set it and forget it, while checking in on the stock periodically.
Take Advantage of Momentum
Serious momentum occurs constantly in the stock market, and every year several stocks experience extreme gains.
Swing trading can allow you to potentially take advantage of these exponential gains by seeking out trends before they peak. Then, you can explore trading stocks that may benefit from the trend.
Since you’re only holding on to a stock for a relatively short period of time, you can take advantage of the market volatility caused by trends by swing trading. Less Stressful
Compared to day trading, the pace of swing trading can seem downright leisurely. Since it’s not as second to second, you have more time to really zero in and focus on coordinating your entry and exit within a trade.
Yet swing trading isn’t so long term that you forget about the stock. That can mean you’re more likely to stay engaged and less likely to get lazy. Swing trading is a sort of Goldilocks zone for many traders … it can be the perfect timeline that helps you stay diligent yet not feel stressed out.
Swing Trading Strategies for Finding Stocks to Trade
Curious about which strategies swing traders might use to find stocks to trade? Here’s a brief overview of some of the methods I teach in my SwingTrades program:
Identify Sector Leaders
Each year, several sectors emerge strong in the stock market. For instance, a recent hot sector is CBD.
Usually, a hot sector has a sector leader. Once this leader goes high, it can kick off a reaction where other related businesses and stocks begin to follow suit. So by identifying that sector leader, you can be ahead of the trend and create many opportunities for trades.
Find Hot IPOs
Each month, 3–10 companies make a market debut. That first stock offering is called an initial public offering, or IPO for short.
Trading on IPOs can give you the opportunity to get in on the ground floor with emerging companies. The key is in figuring out which are hot and which ones aren’t.
Every quarter, publicly listed companies are obliged to release earnings reports to the public. If a company exceeds projections for earnings, its stock has the potential to experience big gains in price. And falling short can make share prices drop.
By learning how to decipher these reports, you can learn how to determine which companies are poised for future growth.
Momentum Charting Indicators
Finding momentum stocks is great, but to effectively swing trade them, it’s important to figure out when to buy and when to sell.
Using momentum charting indicators can be an effective method of finding promising stocks to swing trade. Over the years, I’ve distilled it down to an easy-to-follow method, which I share in my SwingTrades program.
Back It Up With Technical Analysis and Fundamental Research
With any of the above strategies, it’s important to start out with a general thesis or idea about why a stock might go up. Then you need to back it up with both technical analysis and fundamental research.
Technical analysis is where you analyze statistics based on market activity, including past prices and volume. It’s less about the security’s intrinsic value and more about using charts and tools to try to determine patterns that can indicate how a stock might perform in the future.
Fundamental research involves the evaluation of figuring out the intrinsic value of a security based on economic, financial, and qualitative and quantitative factors. Basically, you study everything and anything that could affect the security’s value, including company-specific factors and macroeconomic factors.
A combination of these methods will serve you well as a swing trader.
Stop Loss Orders
Stop-loss orders are a swing trader’s BFF.
A stop-loss allows you to set a price where you’ll sell if the security reaches a certain price. This can help you limit potential losses. So if a stock reaches a certain level, the order will be executed even if you’re not in front of your computer.
For swing traders working on a part-time basis, this can be an extremely handy tool that helps protect your bottom line and should generally be part of every swing trader’s strategy when executing trades.
SwingTrades With Paul Scolardi
I’m Paul Scolardi, and I’ve built a carer out of finding momentum stocks before they peak. I buy low and sell high.
Over the years, I’ve distilled my methods — including the strategies outlined in this post — to help find hot contenders for swing trades.
If you’re interested in delving deeper into these strategies, consider joining my SwingTrades program. In SwingTrades, I guide my students through my methods for finding stocks with the potential to peak in the near future.
While the market always carries an inherent level of risk, my goal is to help my students learn how to become self-sufficient in locating strong trades that involve calculated risk.
Since establishing my program, I’ve taught over 1,400 students from 50 countries and counting. You can be next to join their ranks!
What do you think about swing trading part-time? Leave a comment and let me know your thoughts!
*Results may not be typical and may vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Any investment is at your own risk.