Anything that helps you earn money apart from your 9–5 job could be termed as a side hustle. When it comes to stock trading as a side gig, the return can even surpass the monetary gain secured from your primary work. While one’s trading strategy is majorly influenced by the investment objectives defined, those who trade to earn over and above their paycheck largely rely on day trading and swing trading (Day trading as the name suggests is the buying and selling of stock on the same calendar date and as margins are narrow, only one side commission is charged. Swing trading, on the other hand, requires holding a scrip for some weeks before profit could be captured).
Whereas, others take long position on scrips that pay reasonable dividends with a considerable probability of capital gain. For the latter strategy, things are pretty much straightforward and easy to comprehend but the earlier route has much to consider before a decision is made. Following are some insights that may come handy when resorting to day trading or swing trading.
– Support and Resistance
As far as technical analysis is concerned, support and resistance are two golden numbers for any given scrip. Support is a price level which a stock is likely to maintain and the support level is always below the prevailing market price. It doesn’t mean that a scrip will absolutely not dip below the support level but rather it is understood that statistically it is quite unlikely for this level to be breached, market forces are expecting to lend a helping hand to either sustain at support level or push the price above the support level. In short when a scrip falls below, at support level, investors are expected to buy the stock such that price level is maintained or it is increased. Whereas, resistance is a polar opposite to support. It’s higher than the current market price and it is expected that market forces shall create a hindrance for the scrip to surpass resistance level. Effectively, the process of profit taking is initiated and the stock fails to move up.
When the prevailing market price is more close to the support price level than it is to the resistance price level, day traders and swing traders may consider this as an opportunity for securing reasonable return in a brief span.
– Top Losers
Top losers scrips are mentioned in daily market wrap alongside the volume traded. Stocks with the greatest dip in a single day are stated in this list. When a scrip is listed in top losers and the volume traded that day is higher than the average volume, it is probable that the price shall rise in near future. Intuitively, when volume traded is higher than average even when stock has recorded a decline, investors expect price to rebound later and thus an upward pressure will be exerted on the price level.
– Board Meetings
Board Meetings that are to be followed by dividends announcements should be considered by swing traders. Look for scrips that have board meetings around the corner and have an established history of paying dividends. Usually analysts have formed expectations regarding financial results and dividend announcements, however as it hasn’t been officially affirmed, the share price doesn’t fully absorb the effect yet thereby leaving a room for traders to earn. Thus when a financially favorable announcement is expected, scrips should be bought only to sell a few weeks later when the price reflects actual worth.
– Exchange Traded Funds
Generally, it is relatively easy to predict the overall market trend than it is to predict individual stocks and as ETFs tend follow the market pattern, day traders and swing traders can rely on this information to secure their respective margins. In Pakistan, currently two ETFs are available, one by UBL and the other one by NIT and are available at a price that attracts considerable volume eradicating liquidity concerns, if any. In addition, when it is largely assumed that market is oversold and positive correction shall be followed, even day traders could hop in to earn.
– Speculative Stocks
Speculative stocks are one of the very few ways through which day traders and speculative traders could earn returns exceeding expectations. However, the probability of high returns surely attract high risk. These stocks are volatile in nature and it’s almost impossible to predict their respective standing in the long run. The resistance level is not surpassed for quite long and a kangaroo trend is depicted by the price movement; considerable dips followed by rebound of a similar magnitude. Thus, these stocks could be bought at dips and sold at rebound for multiple times but as mentioned earlier certainly there is a high risk involve as usually support levels for these scrips aren’t as strong as resistance levels. So once such a trend of dip and rebound is observed, the trend is then likely to continue for a few weeks at least.
Taking into consideration the aforementioned clues while day trading and swing trading shall elevate one’s probability of success. Yet, the highest weightage among all should be allocated to the understanding of Support and Resistance price levels before a decision is made.