≡ Menu

Fundamental Trading Versus Swing Trading

The stock market is quite volatile to say the least, so making the choice between fundamental trading and swing trading can sometimes be a very difficult decision to make. It relies on the trader knowing the trends of the market well and being able to determine what the stock is going to do. In the case of the fundamental trader, he holds the stock no more than a day, yet it takes up to several days for a trend to affect market price. This puts the fundamental trader at a disadvantage because in essence, he is trading stock based on his perception of what a particular even will do to the price of the stock he is holding.

Wherein does the difference lie and which method is more profitable? For the new trader, swing trading is a better choice because it allows him to hold onto the stock long enough for contributing events to have an effect on the price. Unless you have been trading for some time, you are not familiar with what types of events may affect the price of the stock you are holding, so it’s important for a new trader to get into the habit of waiting to see what the trend does to the price before he decides to trade or hold. Sometimes even an experienced trader may not always make the right decision, and that may not be something that he can control.

An experienced fundamental trader, at least one who is a true fundamental trader, may not always make the right decisions, but the market is so volatile that one cannot always know the way the market is going to go. Traders make decisions on educated guesses, and sometimes those guesses are incorrect. With the difference in the time frame between a fundamental trader and a swing trader, that is less likely to happen since the event will affect the price before the swing trader is ready to make a move in either direction. It’s more difficult to know what to do when you trade on a daily basis, thus the swing trader generally has an edge over a fundamental trader in that respect. This is likely the reason that most so-called fundamental traders are actually swing traders.

Comments on this entry are closed.