Swing Trading Pros and Cons: What New Traders Need To Know - VectorVest (2024)

So you’ve heard how lucrative this investment style can be, and you want to give it a shot yourself. But you mainly hear the positives – what’s the catch? Are there any drawbacks you should be aware of? What are the pros and cons of swing trading?

We’re going to give you everything you need to know in this breakdown of the swing trading pros and cons. You’ll soon gain an unbiased, transparent understanding of what you’re getting yourself into. You’ll discover the good, the bad, the ugly – and whether or not swing trading is a good idea for you. As with any investment strategy, there are tons of reasons to get started – and there are also things that could deter you from taking the leap.

By the end of this article, though, you’ll have all the information you need to decide if swing trading is the right investment strategy for you. Let’s not waste any more time!

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First Things First: What Exactly Is Swing Trading?

Before we cover the swing trading pros and cons, we need to do some quick housekeeping. If you’re not familiar with this investment strategy, it may be worth your time to start with our blog post covering how swing trading works. But for now, we’ll give you a quick introduction to what swing trading is and how it differs from other styles of investing.

Swing traders seek to capitalize on short-term surges and drops in a stock’s price throughout the overall trend. As a swing trader, you will get in and out of your trades quickly – typically over the course of a few days. If you’re riding a particularly long swing in a stock’s price, you may maintain your position for a few weeks before closing your position and taking profits. You’re in and out far quicker than a long-term investor, but not as quickly as a day trader.

What Are The Pros and Cons Of Swing Trading?

We’re going to start with the positive – breaking down all the reasons swing trading has become one of the most popular investment styles out there. Then, we’ll cover some of the disadvantages of swing trading and make a final recommendation for whether or not you should give swing trading strategies a chance.

What Are The Swing Trading Pros?

The swing trading pros can be summarized as:

• Quick returns
• Very profitable
• Low time commitment

Because you won’t spend more than a few weeks in one position, you can capture profits quickly. Some swing trades will occur over the course of just a few days. This means your capital isn’t tied up too long. If you ended up making a bad call and the trend you were following reverses not in your favor – then you can simply take a small loss and move on to the next opportunity.

You might be thinking to yourself, “that isn’t very much time. You can’t possibly earn much profit that quickly, can you?”. Sure – the profits from this trading style might be a bit lower per trade than, say, a long-term investor who held a stock for 6 months to a year. But because you earn a lot of small wins, they start to add up – and can accumulate to a much larger sum of profits than the long-term investor. You might only make 5-10% returns on your trades. But when you execute 10+ trades in a month, those smaller wins compound and build on one another fast.

But perhaps the biggest pro of swing trading? You aren’t tied to your computer analyzing charts all day. Compared to day trading, the time commitment for swing trading is incredibly low. You can lower your time commitment even further by setting alerts on your watch lists and by setting stop losses and take-profit orders for every position you enter. This makes this trading style a great choice for those who are looking to take on a side hustle.

What Are The Swing Trading Cons?

Now, you know the pros – but what are the disadvantages of swing trading? They can be summarized as:

• Exposure to after-hours changes
• Lost profit potential from exiting too early
• Technical analysis can be mundane & confusing

The beauty in swing trading is that you don’t have to sit at your computer throughout market hours and close your positions before the market closes. However, this does present a bit of risk for you as a trader. Should negative news roll in after hours, or over the weekend – there is nothing you can do to protect yourself and get out before the market opens. You will feel the effects of price gaps and there is really nothing you can do about it. This holds true for long term investors as well, making swing trading an intermediary between day trading and long term investing.

You also may find that you lost out on potential profit from exiting your trade too early. With swing trading, your goal is to get in and out quickly. This helps you rack up wins quickly. Consider the following situation: you identified a great stock to swing trade. You get in at a good time and you get out as the stock starts to swing back down, securing a nice 10% profit along the way. Well done! But, it’s going to hurt when you check back and notice that over the next 6 months, that stock rose an additional 40-60%. Had you rode that out, you’d have earned a much higher return. Now that’s not to say that the same stock didn’t pop up on your radar multiple times, giving you the opportunity to capture 20-30% of the said total profits. You just worked a little harder for them but that’s okay.

Then comes everyone’s least favorite part of investing: technical analysis. Technical analysis involves looking at swing trading indicators to identify trends and assess how much momentum they have. This is how you’ll identify opportunities and find the right time to get in and out of your position. But let’s face it – looking at charts is mundane. And early on, it can get flat-out confusing. This deters some investors from trying this approach, and instead, opting for long-term investment strategies that don’t rely on nearly as much technical analysis.

The Swing Trading Pros and Cons – Does One Outweigh The Other?

Now that you know the individual pros and cons of swing trading, it’s time to ask the question everyone wants to know: does one side outweigh the other? In our opinion, the pros far outweigh the cons. That’s because many of the cons can be alleviated through proper education and the help of tools & software.

But the reality is that only you can determine whether or not you should become a swing trader. After all, it is your money being invested. Do what feels right for you. But with that said, here is our final verdict on the matter: the pros outweigh the cons.

Swing trading is one of the most simple, profitable styles of investing. And it doesn’t take much time. Sure – you take on some risk during after-hours, and you may lose out on long-term profits. And technical analysis is complicated and boring. But allow us to offer a bit of resistance to these supposed “drawbacks” below:

Every investment strategy comes with its own risks. When you consider the risks of swing trading, they are very minor – especially when you have the help of stock forecasting software (more on this in a moment). And while you may lose out on huge long-term profits, you more than makeup for it through the volume of trades you execute along the way. And, if you hate technical analysis – just know that you can eliminate it altogether with the right software.

Eliminate Many Of The Swing Trading Cons With The Right Tools

Want to eliminate the risk, uncertainty, emotion, and human error associated with swing trading? Want to execute trades on autopilot without wasting your time filtering through charts and conducting technical analysis? And all the while, securing impressive profits and winning trades? If all of this sounds good to you, then consider getting started with a stock forecasting software like VectorVest.

VectorVest is the most sophisticated, intuitive system in the investment world. We use proven mathematical models to time the market to a high degree of accuracy. In fact, we’ve been one step ahead of every major market move for the past 20 years. Based on a proprietary system that simplifies all technical indicators, we present you with a clear buy, sell, or hold recommendation for any given stock. Want to see how easy and simple we make investing? Try it out yourself with a free stock analysis today.

In the VectorVest dashboard, you can easily identify opportunities by pulling up our searches and taking a look at our recommendations. You’ll find Hot Stocks, Retirement Stocks, Hot Industries, and much, much more. Or, build out your own custom watchlists. The beauty in our platform is that you can still conduct technical analysis, use indicators, and invest the old-fashioned way if that’s your thing. With VectorVest, investing can be as simple or complex as you like.

Final Thoughts On Swing Trading Pros and Cons

At this point, we’ve answered the question you came here with today – what are the pros and cons of swing trading? By now you know that the good outweighs the bad. All that’s left to do is consider whether or not this strategy is right for you and get started learning how to swing trade.

Remember – for a simple approach to investing in the stock market, trust the VectorVest system. You’ll enjoy a high rate of success without all the hard work of traditional technical analysis. There are no commissions, no hidden fees – just unbiased, data-driven investing recommendations. Get started today and change the way you view investing forever. Secure your 30-day free trial and see what the hype is about.

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