the Swing trade Is an interesting strategy for beginners in the stock exchange, allowing them to gain experience with it operations Scheme. Thus, in addition to being an attractive method, it offers very satisfactory earning opportunities.
However, it is necessary to point out that the Swing trade It is a risky investment, which is why it requires certain attitudes and knowledge, so that it can be used in the best way.
Swing trading is the name given to the strategy used on the stock exchange, which focuses on short and medium term investments. In this sense, this strategy aims to find opportunities in market trends, and then take advantage of the performance of stocks, futures and other types of assets.
Although it is a more planned strategy and has a longer development time, swing trading still carries operational risks, like most financial operations.
Compared to day trading, this method brings greater peace of mind to the trader, as it eliminates flexibility in operations, and avoids impulsive actions.
On the other hand, day trading offers good opportunities to buy and sell quickly, for those who have enough technical ability to spot the right moment!
To invest in this method, a trader needs to study technical analysis or graphic analysis. For this, daily charts, whether it is 60 minutes or intraday, should be used to understand market fluctuations and be able to respond efficiently.
This means that to be a swing trader you need a lot of study to understand how stock charts work and how they can be read. Therefore, contrary to what many believe, an investor of this type should never act on speculation or intuition.
With the swing method, the investor can take it day by day more easily, making gains in the future Short-term But without having to follow point-to-point processes. Thus, he can develop other activities, unlike day traders and speculators who perform many operations during the day.
In general, graphic analysis is an essential part of the design process. swing tradingIn addition, it is very important to respect the entry and exit points, as in other investments.
When the market is trending, the swing trade has more chances to profit, while when it is consolidating, it is difficult to predict what will happen in the future.
To have a broad strategy, the trader should be aware of such elements as:
- Economy, business and politics news: This is because these are the channels that will report on events that directly affect the companies that make up the exchange. With this information it will be possible to identify trends and bumps that may occur on a daily basis, which directly affect the swing trader;
- Study time: Like other investment modalities, swing trading requires a lot of study. Thus, the investor is familiar with the tools properly to be able to implement them Analytics technical quality;
- Analytical reports by brokers and other financial institutions: These documents, which are generally available to clients, provide interesting pointers and asset recommendations for many investment strategies.
The primary difference between day trading and swing and position trading is related to the duration of each of these operations. In this sense, day trading is the way in which a process can be executed in just a few minutes. So, at the end of each trading session, the trader resets his positions and can start from the next day.
already in case position tradeA pending buy, also known as a pending buy, is buying stocks without an exact sale date, according to an investor’s analysis, as the goal is to invest for the long term, not to speculate.
This way, position investors can follow the charts to understand the best timing, but their goal is to find the best opportunities over the years and predict the performance of their assets.
The trading profit of the position comes from dividends (corporate profits that are shared with the shareholders). In addition, if stocks fall, investors will continue to buy, seeing a decline as an opportunity to take advantage of a rally in the future.
Given this, the swing trader is a type of operator who is sandwiched between day trading and trading position.
There can be both professional and amateur traders. Thus, anyone can perform swing trading, but it is imperative that they take a preparatory course and fully understand how to perform data analysis.
Working in the financial market is getting easier and easier. However, this is not an ideal option for everyone. This is because strategies Such swing trading requires a lot of knowledge, good timing and the right profile.
Therefore, a trader will need to take high risks, know how to make decisions in times of stress, be aware of political and economic events and know how to determine how they affect market fluctuations.
Swing trading is not a speculative strategy, but a form of investment that requires specific knowledge.
In this sense, it is the professional trader who makes this job his area of expertise. For this, they graduate from courses such as economics, finance and management.
Therefore, in 2003, the National Monetary Council (CMN) decided that professionals who qualified as traders must demonstrate training in the stock market. Hence, they must have a board approved certification.
In the case of amateurs, those who act on their own, it is not necessary to prove this through a certificate, since the operations are not performed for third parties.
Among the advantages, we have greater rationality in response time, since it is not necessary to adjust the movement on the respective day. In this sense, since trades usually last for a few days, the trader has time to analyze whether or not the trends will materialize.
In addition, you will have more time to devote to other activities, because the swing method does not require special attention.
There is also the cost ratio, which is lower for a swing trade. This is because brokerage firms charge a brokerage fee for each transaction performed, just like a market fee. Therefore, making fewer operations through swing trading is a way to save money.
As for the disadvantages, we have the instability of the market, which can represent an unfavorable situation at the time when the investor is about to receive his profits, the risk of not getting the assets back, which can cause big losses and other problems with the company that owns the shares.
What are the risks of long term trading?
one of the largest Swing trading risks It is the “excitement” of the dealer. This is because it is common to unnecessarily lengthen operations, which can lead to the loss of previously achieved gains.
Given a period of several days, a trader can feel motivated and stay in a process, even if his goal has already been achieved, with the ideal of making more profits or recovering a loss, the latter factor that can exacerbate a loss.
In this regard, specialists indicate the use of stop loss And Stop earningwhich greatly enhances its importance for Alternative trade security.
These tools allow the trader to automatically close the transaction once it reaches a pre-determined value.
Swing trade fees and taxes
There is a brokerage fee that is charged for every action a trader takes on the exchange. Thus, different fees are allocated, either at fixed rates of R$10.00 or R$20.00, for example, which will be charged according to the purchase or sale.
The rate system has a variable character, based on the “Bovespa Table”, which is the reference used for this model.
In addition, some brokerages may charge a custody fee, which is responsible for ensuring that stocks are held for a long time. However, many institutions exempt traders from this type of cost.
Finally, it is important to mention that there is an income tax on swing trading, at the rate of 15% on the profit obtained. Therefore, monthly amounts and payments must be analyzed by the merchant, through the Federal Revenue Collection Document (DARF)
For investors who have sold shares of less than R$20,000 per month, there is also an income tax exemption, which applies to all those on the stock exchange.
- First, you need to open an account at the brokerage firm of your choice;
- Then follow the Home Broker (a system provided by the brokerage so that you have access to the market floor) to execute the trading orders. Buying and selling on the stock exchange.
- Through your market research, find out which are the best buys and sells, according to the identified trends;
- Enter the stock symbol, quantity and desired price. Then, when the seller appears, the purchase will be executed.
This is an example of how to perform a file Swing trade in brokerage. However, in order to do this with more convenience, it is very important to conduct a prior market study.