Position trading
-keeping for at least one year or longer
-returns will be mostly from slow capital growth and annual dividend payout
-the stocks is normally held by funds with low retail float syndicate professionals may not be interested
Characteristics of Position Trading Stocks
1. Consistent financial performance with good record of growth in revenues and earnings
2. Consistent dividend payout, and the dividend yield is at least as higher than saving accounts interest rate
3. The stocks may not be frequently covered by funds and brokers for public information
4. Stocks are expected to be long term holdings, suitable for smaller fund managers if the stock is small or mid size in market capitalization.
5. The liquidity is low, but volume may appear before or after quarterly results
6. The stock can be likely undervalued with low PE because of the absence of market attention
7. Fundamental analysis is very important for investing/trading these stocks.
8. Technical analysis and technical system may not work on trading these stocks
Swing trading
-the stock are very liquid with price swing from support and resistance, with occasional trading in uptrend or downtrend
-the price of these stocks can fluctuate a lot depending on what sorts of news fed by the market makers
Characteristics of Swing Trading Stocks
1. The stock will be heavily covered by most brokers.
2. These stocks are usually placed as theme play by analysts and brokers to provide actions to the market
3. These stocks are held by many small funds, and the fund managers are the professionals and movers of the stocks.
4. Generally the price would swing within the range of support and resistance, with occasional breakout above resistance or break down from support with positive or negative news fed into the market.
5. These are the stocks that the herds will be interested, as well as the professionals and technicians.
6. These stocks are not long term hold as there is no record of consistent growth and the prices will swing according to news, rumors or earning results.
7. Technical analysis is important for trading these stocks for the correct timing of entries and exits.
8. The stocks are usually having sound fundamentals or acceptable fundamentals for syndicates to take the risk of holding large positions for trading play.
Rationale
1. Have knowledge of fundamental analysis to pick the suitable stocks for position trades
2. Have the technical knowledge to get good timing to trade with likely profits from swing trading
3. Using the principle of focus on a few stocks, it is possible to have position as well as swing trading for specific selected stocks that are not so illiquid. This means that a portion of a large position may be used for swing trading.
4. With position and swing trading style, it is possible to have more time to focus on the stock charts, fundamental performance and news continuously. Swing trades will bring regular gains, while position trades may provide long term capital gains.
Strategies for Position together with Swing Trading
1. Allocate part of the stock holding for trading opportunities
2. Buy or accumulate on support and sell on resistance setup
3. Complete disposal of the stocks base on fundamental valuation
4. Focus on a few with large positions
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