Q: What is swing trading?
A: Swing trading is generally defined as investing in something (such as a stock) for a few days, hoping to profit from a change, or “swing,” in the price. It’s not as extreme as day trading, where stocks are often held for just minutes or hours, but it’s not a much more sound approach, either.
Like many day traders and others, swing traders tend to employ “technical analysis” of securities. Thus, instead of, say, studying the company behind a stock to evaluate its financial health, competitive position and growth prospects, a swing trader will just observe the stock-price’s movements, looking for patterns and drawing conclusions from them.
Q: What is “trading below cash?”
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A: The term “trading below cash” can get some investors excited, because it refers to a company that has more cash in its coffers than its entire market capitalization.
Put another way, it has more cash per share than its share price. See? It’s enticing, making you think it can’t help but be a bargain. Here’s the catch, though: The money is probably being spent, and it might not be there for long.
Many companies in trouble have a high “burn rate,” meaning that significantly more money is going out than is coming in. That said, sometimes via some careful screening you might find a healthy, growing company with lots of cash and a relatively low price.