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Stock Promoters
For those of you not familiar with that term, its simply an outfit that gets paid to promote a particular companys prospects to people.
Im torn a bit as to what I think about these places. On one hand, lets say you have a great little company, but no ones heard of you. You trade on the pink sheets and cant seem to get your stock price over a buck, despite making good profits and growing your business each year. What can you do Well, you can go to a promoter, pay him a fee and hell go out and spread the word about your company, hopefully opening a bunch of eyes to your possibilities.
That sounds relatively harmless right Well, yes and no. If done properly it is harmless. But some promo houses take it a bit too far, hyping the company with facts that simply arent true, and making it sound much better than it is. So, what happens is that the average Joe gets an email telling him about the hottest new gizmo on the planet, telling him how the company is going to take over from MicroSoft, and that hes got to buy it now, a few days ahead of some important news thats about to hit.
So, Average Joe buys XYZ and calls his friends. They buy XYZ. Soon the stock is moving higher and all is well. But then the promo house itself, which may have gotten 100K shares, starts selling into that move. In a matter of days, XYZZ is lower than it was. That my friends is a classic pump and dump.
If you get a piece from one of those promo houses and the info sounds interesting, do some research. If after poking around the company you find that hey, this does have some merit then by all means make a decision as to whether you want to invest in it. But dont take any of the hype you see at fair value.Make sure you prove each and every point the Promo house has indicated. Ive found some good companies after reading promo hype, but Ive found a lot more that werent worth a second look. Do your homework.
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What is Swing Trading?
Swing Trading takes advantage of brief price swings in strongly trending stocks to ride the momentum in the direction of the trend.
Swing trading combines the best of two worlds -- the slower pace of investing and the increased potential gains of day trading.
Swing traders hold stocks for days or weeks playing the general upward or downward trends.
Swing Trading is not high-speed day trading. Some people call it momentum investing, because you only hold positions that are making major moves.
By rolling your money over rapidly through short term gains you can quickly build up your equity.
How does Swing Trading work
The basic strategy of Swing Trading is to jump into a strongly trending stock after its period of consolidation or correction is complete.
Strongly trending stocks often make a quick move after completing its correction which one can profit from.
One then sells the stock after 2 to 7 days for a 5-25% move. This process can be repeated over and over again. One can also play the short side by shorting stocks that fall through support levels.
In brief a Swing Traders goal is to make money by capturing the quick moves that stocks make in their life span, and at the same time controlling their risk by proper money management techniques.
What are the advantages of Swing Trading
Swing Trading combines the best of two worlds -- the slower pace of investing and the increased potential gains of day trading.
Swing Trading works well for part-time traders especially those doing it while at work. While day traders typically have to stay glued to their computers for hours at a time, feverishly watching minute-to-minute changes in quotes, swing trading doesnt require that type of focus and dedication.
While Day Traders gamble on stocks popping or falling by fractions of points, Swing Traders try to ride swings in the market. Swing Traders buy fewer stocks and aim for bigger gains, they pay lower brokerage and, theoretically, have a better chance of earning larger gains.
With day trading, the only person getting rich is the broker. Swing traders go for the meat of the move while a day trader just gets scraps. Furthermore, to swing trade, you dont need sophisticated computer hook-ups or lightning quick execution services and you dont have to play extremely volatile stocks.
We believe that the Swing Trading method is a better way for the individual investor to attain superior investment results through short-term trading in the stock market. This trading strategy has been carefully designed for the needs of the individual investor who does not have the resources that institutions and professional money managers may have.
How to Swing Trade
To fully understand what swing trading really is, you first need to understand what up/down trends are.
Up Trend: Simply put an uptrend is a series of higher highs and higher lows. In other words, an uptrend is a series of successive rallies that extend though previous high points, interrupted by declines which terminate above the low point of the preceding sell-off. Often the high of the last swing in the trend will serve as support for the next low. These areas are circled.
Down Trend: Simply put a downtrend is a series of lower highs and lower lows. In other words, a downtrend is a series of successive declines that extend though previous low points, interrupted by increases which terminate below the high point of the preceding rally. Often the low of the last swing in the stocks trend will serve as resistance for the next high. These are circled.
Long Swing Trades: Once an uptrend has been identified a swing trader looks for buying opportunities in that stock. This can be identified when the stock experiences a minor pullback or correction within that uptrend. The swing trader then activates a trailing buy-stop technique. If prices break out above the trailing stop loss, you will be stopped out and long in the trade. If prices decline, your buy-stop will not be touched.
Short Swing Trades: Once an downtrend has been identified a swing trader looks for selling opportunities in that stock. This can be identified when the stock experiences a minor rally within that downtrend. The swing trader then activates a trailing sell-stop technique. If prices break down and fall below the trailing stop loss, you will be stopped out on the short side. If prices rally, your sell-stop will not be touched.
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