How many people do you think you know that need a swing trade? How many people are you betting in this market right now? For that matter, how many people are you betting on how well the markets will move going forward? Most of you who have made money in this market are probably aware of what a swing trades are and know they can get huge profits if they get this right.
While there are several things you need to know if you want to start trading it, there is one thing that most people don’t think about. Why do I need to know how much to bet? Why do my other investments trade as well? There is one problem with most swing trading strategies. They don’t understand the nature of a swing trade. They think they can trade the market like a normal person does, but the way that the markets actually work is much different.
A swing trade is an investment that involves several bets in order to profit in different ways, but you are only actually trading one position of the market depending on how it is going. The first position is for your profit. That position represents the amount that you are going to make off the position you are trading – which depends, of course, on how the stock is doing. The second and finally position is for both your profit potential, plus the money you’re going to earn off another investment that is going to change hands at a certain time.
So, what this means is while you are taking all your other investments and putting them aside for the day, you can trade stocks that go down by one or three percent or you can trade on the rise. Even if you have the worst stock of the few that went down, trading up takes you one position, and that’s all it’s going to do. Then, when the stock goes up, you’ve done the opposite, and done that trade, so your profit is one-third of that position.
You may have heard this theory before. The idea is called the Nash Equilibrium. The Nash Equilibrium occurs when two people who are both gambling can both win. In other words, you can both put all your money into one investment and have two different strategies, but with one bet placed on the up and one on a declining stock – which is the main point of the problem. If people understood this theory, they would not have problems in the markets and would stop trying to “game” the markets and try to make the numbers seem better than they really are.
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