The basics of swing trading are fairly easy to explain: you take an asset (e.g. stocks, gold, platinum, diamonds, a penny stock or anything), and change the pricing of it in response to the future expectations of the general public.
As I said, this is a pretty straightforward explanation, as it should be. If you try to explain the nuances of it to someone who hasn’t traded for a while, that is likely to be the end of the discussion at best.
Before most people learn to trade, a person will simply take a stock and make a profit or loss based on how the market is behaving right now. There is nothing wrong with this. You can simply take a stock, make a profit, then sell the stock back into the market to make money. You know exactly what you’re doing, and have a profit to show for your investment.
Now, this is a good thing. No one should feel pressured by this. Of course, this also gives the person who actually made the trades more power to influence the market, and the person who lost the trade has virtually nothing to show for it.
However, there is a way that an expert trader (i.e. someone who has actually done trades) can influence the outcome of the market as a whole.
Let’s imagine that we want to sell someone gold. The individual we sell the gold to in our example is making some money right now based on the market’s reaction to the gold price. In other words, he’s buying as much gold as he can, and he has a small profit to show for it.
What if our expert trader decides to sell us silver back into the market, and puts up a huge loss? At this point, we have no way whatsoever of knowing what he’s doing, and we have no leverage to influence the market in any way.
What we have is a situation of “volatility trading.” Our expert trader has put up a bunch of price at which he thinks he will get more money for his investments if we buy the market at those prices, but then when the underlying asset has dropped, he can’t sell the price up into the market. He can’t stop the prices from dropping, and can’t make any money. And as a result, all the buying he does make with our position of silver
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