If you want to become successful as a swing trader, you have to educate yourself continually on the markets and trends. It isn’t enough to simply read the stock indexes for price fluctuations; you have to make sure you read the business section of the newspaper in order to understand the reasons behind the current prices and the factors that are contributing to the increase or decrease in market value. Even more important, you need to know the factors that may have a potential effect on the price of stock before you make the first investment.
If you think that only economic issues influence the price of stock, you are quite uneducated in the workings of the market. Although everything is tied to an economic index, some things that may not be directly monetary in nature may have an effect on the price of the stock.
For example, the knowledge that a particular company is involved in illegal actions or treating employees in a way that is undignified may cause investors to withdraw their support of that company, thus causing a plunge in the price of the stock. Other factors that may affect the price of stock include mergers, negative publicity, especially that surrounding the company and its relationships to the public, downsizing, reports of financial difficulties, and many other types of negative publicity, financial or otherwise. Investors have a tendency to be fickle, and they do not wish to invest in any company who is not a positive influence on the economy.
A successful swing trader must be fully aware of all of the different factors that may affect market price, so that if issues arise that will likely affect price on a downward turn, they can trade the stock while it is still high enough for him to turn a profit. Some incidents may turn a swing trader into a fundamental trader because the trader knows the factors that will cause a plunge in the price of the stock, and he wants to get rid of it before that happens. For instance, the notification that a company has just filed bankruptcy will cause the price of company stock to fall rapidly as investors scurry to get rid of their stock while they are still able to get their investment back before everyone hears the news and stops buying stock from that company. Being informed prevents you from taking the loss that changes in the market create.