A swings trade is an investment in a currency which you are seeking to profit from. This can occur because you are holding an investment in a currency for personal use, such as gold or the precious metal called silver. You also need to understand, however, that a commodity like timber, a commodity which is traded only at the point of purchase, is also a swings trade (Figure 1).
Figure 1 – A swings trade is an investment in a currency
As such, while a timber purchase may seem like a great idea, if you plan to sell before you sell your timber, you are buying something that will ultimately not be valuable in the future.
An investor’s goal should be to understand what the potential return on an investment is.
The problem lies in understanding the risks involved.
Investors cannot see the past – even if they can understand what it is like not to understand.
Thus to profit, it must be through making a decision to sell now.
The worst thing that could have befallen you (which you do not wish to learn), is to lose money. Even when something goes bad, you still have all your money invested in it. Therefore you take your chances in the gamble with all your resources.
When should you think of a swings trade?
When you have a specific investment which means that you want profit if things go wrong.
For instance, when your business does not work and you want to buy back more shares.
Figure 2 – When you would buy back more shares
In the worst case scenario, the business runs out of stock which you have bought (Figure 3).
At that point, if you choose to buy them back at current price, you will be losing all of your money.
But if you do not want to lose that amount of money or you do not want to wait around a long, you would want to sell those stocks right away.
This is why you want to buy them at the best price (Figure 4).
If you sell the stock at the previous price, you would be losing all of the money from the previous trade and would not have the profit from the next sell.
This leads to the question: Does every good trade require a good time?
But the more complicated the trade becomes, the more time could be required or the riskier it is.