Investing Archives

Q: What Does It Mean to 'Buy Low, Sell High'?

'Buy low, sell high' is an investment philosophy that advocates buying stocks or other securities at a lower price than you can later sell them. This is the opposite of buying high and selling low, which effectively results in investors selling stocks at a loss.

Q: Is buying low and selling high a good strategy?

Buying low and selling high is generally a good strategy as it allows you to take advantage of price movements in the market. However, there is no guarantee that this strategy will always be successful, and you may end up losing money if the market conditions are not favorable.

Mar

2025

Understanding the Buy Low, Sell High Strategy

Buy Low, Sell High Strategy: An Investor’s Guide

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

When it comes to investing, there are certain rules of thumb that investors are often encouraged to follow. One of the most-repeated adages in investing is to try and “buy low, sell high.”

Buying low and selling high simply means purchasing securities at one price, then selling them later at a higher price. This bit of investing wisdom offers a relatively straightforward take on how to realize profits in the market. But figuring out how to buy low and sell high — and make this strategy work — is a bit more complicated. Timing the market is not a perfect science, and understanding that implementing a buy low, sell high strategy is more complicated than it sounds is critical to investor success.

Key Points

• Buy low, sell high is an investment strategy that involves purchasing securities at a lower price and selling them later at a higher price.

• Timing the market and implementing this strategy can be challenging, as market movements are unpredictable.

• Understanding stock market cycles and trends can help determine when to buy low and sell high.

• Technical indicators and moving averages can assist in identifying pricing trends and points of resistance.

• Investor biases and herd mentality can impact decision-making, so it’s important to make rational choices based on research and analysis.

What Does It Mean to “Buy Low, Sell High”?

“Buy low, sell high” is an investment philosophy that advocates buying stocks or other securities at one price, and then selling them later when they’ve (hopefully) gained value. This is the opposite of buying high and selling low, which effectively results in investors selling stocks at a loss.

When investors buy low and sell high, they may do so to maximize profits. For example, a day trader may purchase shares of XYZ stock at $10 in the morning, then turn around and sell them for $30 per share in the afternoon if the stock’s price increases. The result is a $20 profit per share, less trading fees or commissions. Of course, a price increase of that magnitude within a single day is highly unlikely.

Likewise, a buy and hold investor may purchase stocks, exchange-traded funds (ETFs), or mutual funds and hold onto them for years or even decades. The payoff comes if they sell those securities later for more than what they paid for them.

Recommended: How to Know When to Sell a Stock

4 Tips on How to Buy Low and Sell High

The following tips may help investors develop a buy low, sell high strategy (or avoid the buy high, sell low trap).

1. Investing with the Business Cycle

Understanding stock market cycles and their correlation to the business cycle can help when determining how to buy low and sell high.

The business cycle is the rise and fall in economic activity that an economy experiences over time. If the business cycle is in an expansion phase and the economy is growing, for instance, then stock prices may be on the upswing as well. On the other hand, if it’s become apparent that economic growth has peaked, that could be a signal for stock price drops to come as an economy slows or enters into a recession.

But like most strategies that aim to buy low and sell high, investing with the business cycle can be challenging.

It’s also important to remember that security prices typically don’t move in a straight line up or down in lockstep with a specific phase of the business cycle. Instead, most securities experience a level of volatility, where prices move up or down (or both) in the short term before reverting to the mean.

2. Look at Stock Pricing Trends

Investors who want to buy low may find it helpful to pay attention to pricing trends or technical indicators. Tracking trends for individual securities, for a particular stock market sector, or the market as a whole can help investors get a sense of what kind of momentum is driving prices.

For instance, an investor wondering how low a stock price can go can look at technical indicator trends to identify significant pricing dips or rises in the stock’s history. This could, potentially, help determine when a stock or security has reached its bottom, opening the door for buying opportunities. Conversely, investors may also use trends to evaluate when a stock has likely reached its high point, indicating that it’s prime time to sell.

3. Use Moving Averages

Moving averages are a commonly used indicator for technical analysis. A moving average represents the average price of a security over a set time period. So to find a simple moving average, for example, an investor would choose a time period to measure. Then they’d add up the stock’s closing price each day for that time period and divide it by the number of days.

The moving average formula can help compare stock pricing and determine points of resistance. In other words, they can tell investors where stock prices have topped out or bottomed out over time. Moving averages can smooth out occasional pricing blips that temporarily push stock prices up or down.

Comparing one moving average to another, such as the 50-day moving average to the 200-day moving average, can also help investors to spot sustainable up or down pricing trends. All this can help when deciding when to buy low or sell high.

4. Beware of Investor Bias

An investor bias is a pattern of behavior that influences reactions to a changing market. For example, noise trading happens when an investor makes a trade without considering the state of the market or timing. The investor may follow pricing trends but make trades without considering whether the time is right to buy or sell.

Investors who give in to biases may find themselves following a herd mentality when it comes to making trades. If news of a pending interest rate hike sparks fear in the markets, investors may start panic selling in droves. This can, in turn, cause stock prices to drop. On the other hand, irrational exuberance for a specific stock or type of security can push prices up, causing an unsustainable market bubble.

Investors who can refrain from being influenced by the crowd stand a better chance of making rational decisions about when to buy or when to sell to either maximize profits or minimize losses.

Pros and Cons of Buy Low, Sell High

A buy low, sell high strategy can work for investors, but while it’s a worthy goal, the implementation can be difficult. Investors who are too focused on timing the stock market can run into difficulties.

Benefits of Buy Low, Sell High

Buying low and selling high can yield these advantages to investors.

• Potential bargain-buying opportunities. If investor sentiment is causing fear and panic to take over the market and push stock prices down, that could open a door for buy low, sell high investors as they buy the dip. Individuals who ignore market panic could purchase stocks and other securities at a discount, only to benefit later once the market rebounds and prices begin to rise again.

• Potential for high returns. An investor skilled at spotting trendings and reading the market cycle could reap sizable profits using a buy low, sell high strategy. The wider the gap between a stock’s purchase and sale price, the higher the profit margin.

• Beat the market. A buy low, sell high approach could also help investors to beat the market if their portfolio performs better than expected. This might be preferable for active traders who forgo a passive or indexing approach to investing.

Disadvantages of Buy Low, Sell High

Attempting to buy low and sell high also holds some risks for investors.

• Timing the market is imperfect. There’s no way to time the market and which way stock prices will go at any given moment with 100% accuracy. So there’s still some risk for investors who jump the gun on when to buy or sell if stocks have yet to reach their respective lowest or highest points.

• Being left out of the market. Investors who want to buy low and sell high would not want to buy securities when the market is up. That practice, however, could lead to substantial time out of the market entirely, especially during bull markets.

• Biases can influence decision-making. Investment biases and herd mentality can wreak havoc in a portfolio if an investor allows it. Instead of buying low and selling at a profit later, investors may find themselves in a buy high, sell low cycle where they lose money on investments.

• Pricing doesn’t tell the whole story. While tracking stock pricing trends and moving averages can be useful, they don’t offer a complete picture of what drives pricing changes. For that reason, it’s important for investors also to consider other factors, such as consumer sentiment, the possibility of a merger, or geopolitical events, influencing stock prices.

Alternatives to Buy Low, Sell High

Buying low and selling high is not a foolproof way to match or beat the market’s performance. It’s easy to make mistakes and lose money when attempting to time the market unless, of course, you possess a crystal ball or psychic abilities.

There are, however, other ways to invest without trying to time the market. Take dollar-cost averaging, for example. This strategy involves staying invested in the market continuously through its changing cycles. Instead of trying to time when to buy or sell, investors continue making new investments. Over time, the highs and lows in stock pricing tend to average out.

A dividend reinvestment plan (DRIP) is another option. Investors who own dividend-paying stocks may have the opportunity to enroll in a DRIP. Instead of receiving dividend payouts as cash, they’re reinvesting into additional shares of the same stock. Similar to dollar-cost averaging, this approach could make it easier to ride out the ups and downs of the market over time and eliminate the stress of deciding when to buy or sell.

Investing with SoFi

A buy low, sell high investment strategy is fairly simple, in that it involves buying a security at one price, and selling it after, or if, it appreciates. Obviously, there’s no guarantee that any asset will appreciate, so it’s possible investors could lose money – but they could also see positive returns, too.

Further, the strategy can be challenging to implement. Executing a buy low, sell high plan successfully means researching and doing due diligence to understand how the market works.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

Is buying low and selling high a good strategy?

Buying low and selling high can generally be a good strategy as it allows you to take advantage of price movements in the market. However, there is no guarantee that this strategy will always be successful, and you may end up losing money if the market conditions are not favorable.

Is it illegal to buy low and sell high?

There is no law against buying low and selling high. Most investors make money by buying a security at a low price and then selling it later at a higher price.

Why do you sell high and buy low?

Many investors sell high and buy low because they want to take advantage of market conditions to realize a positive return. When the market is high, investors may sell an investment they purchased at a lower price to make a profit.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Photo credit: iStock/katleho Seisa

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q324-032

Mar

2025

Understanding the Coupon Rate of a Bond

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

A bond’s coupon rate represents the annual interest rate paid by the issuer, as determined by current market interest rates and based on the bond’s face value. Bond issuers typically pay coupon rates on a semiannual basis.

The coupon rate of a bond can tell an investor how much interest they can expect to collect on a yearly basis. The bond coupon rate is not the same as the bond yield, which investors who buy bonds on the secondary market use to estimate the total rate of return at maturity.

Investment-quality bonds can help with diversification in a portfolio while providing a consistent stream of interest income. Understanding the coupon rate and what it means is important when choosing bonds for your portfolio.

What Is the Coupon Rate?

Bonds represent a debt where the bond issuer borrows money from investors and agrees to pay interest at regular intervals in exchange for the use of their capital. Both governments and non-government entities, like corporations, may issue bonds to raise capital to fund various endeavors.

The coupon rate of a bond is usually a fixed interest rate, typically paid out twice per year. That said, there are some variable-rate bonds, as well as zero-coupon bonds (more on those below). Investors often use the term “coupon rate” when discussing fixed-income securities, including bonds and notes.

Recommended: How Does the Bond Market Work

The Role of Coupon Rates in Bond Investments

Investors can buy individual bonds, bond funds, or bond options, which are derivatives similar to stock options.

The coupon interest rate tells you what percentage of the bond’s face value, or par value, you’ll receive yearly. The rate won’t change during the life of the bond, which is why some bonds are worth more than others on the secondary market.

Coupon rates are typically lower for investment-grade bonds and higher for junk bonds, due to their higher risk.

Example of a Bond’s Coupon Rate

Assume you purchase a bond with a face value of $1,000. The bond has a coupon rate of 4%. This means that for each year you hold the bond until maturity, you’d receive $40, regardless of what you paid for the bond.

If you buy a bond on the secondary market, the story changes somewhat. That’s because bonds trade either at a premium to the par value (higher than the face value), or at a discount to par (lower than the face value). Because the coupon rate of the bond stays the same until maturity, it may represent a higher or lower percentage of the par value — this is called the yield.

History of the Term Coupon

Bond holders used to get literal coupons as a way of collecting their interest payments. This is no longer the case, as interest is paid on a set schedule to the investor directly.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

Calculating the Coupon Rate

The bond coupon rate formula is fairly simple:

Bond coupon rate = Total annual coupon payment/Face or par value of the bond x 100

To apply the coupon rate formula you’d need to know the face or par value of the bond and the annual interest or coupon payment. To find this payment, you’d multiply the amount of interest paid by the number of periodic payments made for the year. You’d then divide that by the par value and divide the result by 100.

Recommended: How to Buy Bonds: A Guide for Beginners

Step-by-Step Calculation of the Coupon Rate

Say you have a bond with a face value of $1,000, which pays $25 in interest to you twice per year.

• To find the annual coupon payment you’d multiply $25 by two to get $50.

• You’d then divide the $50 annual coupon payment by the $1,000 par value of the bond. 50 / 1000 = 0.05

• Then multiply the result by 100 (0.05 x 100) to find that your bond has a coupon rate of 5%.

The Impact of Market Interest Rates on Coupon Rates

How is the coupon rate determined? This is where current market interest rates come into play.

How Interest Rate Fluctuations Affect Bonds

Interest rates can influence coupon rates. An interest rate is the rate a lender charges a borrower. Individual lenders determine interest rates, often based on movements in an underlying benchmark rate. When discussing bond coupon rates and interest rates, it’s typically in the context of changes to the federal funds rate. This is the rate at which commercial banks lend to one another overnight.

Movements in the federal funds rate directly influence other types of interest rates, including coupon rates and bond prices on the secondary market.

When interest rates rise, based on changes to the federal funds rate, that can cause bond prices to fall. When interest rates decline, bond prices typically rise. When bond prices change that doesn’t impact the coupon rate, which stays the same. But a bond’s price is an important consideration for investors who trade on the secondary market because it impacts the yield to maturity.

Strategies for Investors in a Changing Rate Environment

Bond prices can move up or down based on the coupon rate, relative to movements in interest rates.

When interest rates are higher than the bond’s coupon rate, that bond’s price may fall in order to offset a less attractive yield. If interest rates drop below the bond’s coupon rate, the bond’s price may rise if it becomes a more attractive investment opportunity.

When comparing coupon rates and bond prices, it’s important to understand the relationship between the bond’s face value and what it trades for on the secondary market. If a bond is trading at a price above its face value, that means it’s trading at a premium to par. Conversely, if a bond is trading at a price below its face value, that means it’s trading at a discount to par.

An investor who purchases a bond with the intent to hold it until it reaches maturity does not need to worry about bond price movements. Their end goal is to collect the annual interest payments and recover their principal on the assigned maturity date, making it a relatively safe investment as long as the issuer fulfills their obligation.

Investors looking to buy bonds and resell them before they mature, however, may pay attention to which way bond prices are moving relative to the coupon rate to determine whether selling would yield a profit or loss.

Understanding Coupon Rate vs. Yield

Coupon rate tells investors how much interest a bond will pay yearly until maturity. But there are other metrics for evaluating bonds, including yield to maturity and interest rates. Understanding the differences in what they measure matters when determining whether bond investments are a good fit and what rate of return to expect.

Coupon Rate vs. Yield to Maturity

A bond’s yield to maturity or current yield reflects the interest rate earned by an investor who purchases a bond at market price and holds on to it until it reaches maturity. A bond’s maturity date represents the date at which the bond issuer agrees to repay the investor’s principal investment. Longer maturity dates may present greater risk, as they leave more room for the bond issuer to run into complications that could make it difficult to repay the principal.

When evaluating yield to maturity of a bond, you’re looking at the discount rate at which the sum of all future cash flows is equal to the price of the bond. Yield to maturity can be quoted as an annual rate that’s different from the bond coupon rate. In figuring yield to maturity, there’s an assumption that the bond issuer will make coupon and principal payments to investors on time.

The coupon rate is the annual interest earned while yield to maturity reflects the total rate of return produced by the bond when all interest and principal payments are made.

Coupon Rate vs Interest Rate

While coupon rate and interest rate seem similar, they are distinct. The coupon rate is set by the issuer of the bond, and the amount paid to the bondholder is tied to the face value.

But the prevailing interest rate set by the government is what determines the coupon rate. If the central bank, i.e. the Federal Reserve, sets the interest rate at 6%, that will influence what lenders are willing to accept in the form of the coupon rate.

Also, the price of a bond on the secondary market hinges on the coupon rate. A higher-coupon bond is more desirable than a lower-coupon bond, so its price will be higher.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

Variable-Rate and Zero-Coupon Bonds

Not all coupon rates are fixed. Investors can also consider whether buying variable-rate bonds or zero-coupon bonds might make sense.

Fixed vs. Variable Coupon Rates and Investment Impact

Although bonds typically offer fixed-income payments, some bonds do offer coupon rates that adjust periodically. For that reason these bonds are sometimes called floating-rate or adjustable-rate bonds.

In these cases, the coupon rate adjusts according to a formula that’s linked to an interest rate index such as the SOFR (Secured Overnight Financing Rate), the new benchmark in the U.S. that has largely replaced the LIBOR (London Interbank Offered Rate).

Although these are income-producing bonds, and there is always the possibility that they could offer a higher yield under the right conditions, they are not technically fixed-income instruments, which is something for investors to bear in mind. In addition they come with the risk of default.

Zero-Coupon Bonds Explained

Some bonds, called zero-coupon bonds, don’t pay interest at all during the life of the bond. The upside of choosing zero bonds is that by forgoing annual interest payments, it’s possible to purchase the bonds at a deep discount to par value. This means that when the bond matures, the issuer pays the investor more than the purchase price.

Zero-coupon bonds typically have longer maturity dates, which may make them suitable when investing for long-term goals. This type of bond may experience more price fluctuations compared to other types of bonds sold on the secondary market. Investors may still have to pay taxes on the imputed interest generated by the bond, though it’s possible to avoid that by investing in zero-coupon municipal bonds or other tax-exempt zero-coupon bond options.

The Takeaway

Investing in bonds can help you create a well-rounded portfolio alongside stocks, and other securities, which is why knowing the coupon rate of a bond is important. The coupon rate is the interest rate paid by the issuer, and it’s fixed for the life of the bond — which makes it possible to create a predictable income stream, whether you buy the bond at issuance or on the secondary market.

As you get closer to retirement, bonds can be an important part of your income and risk management strategy, whether you’re investing through an IRA, a 401(k), or a brokerage account.

Invest with as little as $5 with a SoFi Active Investing account.

Photo credit: iStock/Inside Creative House

About the author

Rebecca Lake

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN1023143

Mar

2025

What Is a Derivative?

By Laurel Tincher | Growing Wealth, invest, Investing, Terminology | Comments Off

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

A derivative is a financial instrument that derives its value from an underlying asset, such as a stock or bond, or a benchmark such as a market index. Derivatives are considered leveraged products because, for a minimal investment, the investor can control a much larger position.

Derivatives work as a contract between two parties: a buyer and seller. The derivative is a secondary security, meaning it is not an asset itself, but rather it tracks the value of an underlying asset. The value of a derivative is based on market events, price changes, and other factors related to the underlying asset.

Experienced investors often use derivatives to place bigger bets, to help hedge their investments against future loss, or to profit from upcoming market shifts. Some investors also use them to profit or speculate on commodities, such as gold or oil. They can serve different purposes for different people, such as limiting risk related to possible future events.

Key Points

• Derivatives are financial contracts that derive value from underlying assets such as stocks, bonds, or commodities.

• Derivatives are considered leveraged products.

• Options, futures, and swaps are common types of derivatives, each with unique features and purposes.

• Derivatives are used for hedging to manage risk and for speculation to profit from market movements.

• Trading derivatives involves significant risks, including potential for large losses.

• Potential advantages of derivatives include leverage, flexibility, and the ability to hedge against market volatility.

How Does a Derivative in Finance Work?

A derivative is a legally binding contract that can apply to various asset classes, including futures, swaps, and options trading. It outlines the terms, rules, and costs for a potential future transaction based on the performance of an underlying asset.

For instance, if an investor has a significant amount of a particular stock with an unrealized gain, they might choose to enter into a derivative contract that gives them the ability to sell it at today’s prices on a future date. This may provide them with some protection against future losses.

Derivatives are also a way to give investors exposure to a certain asset class without having to actually buy the assets. Derivatives are leveraged contracts, in that the investor pays a smaller fee to control the underlying position.

The seller of a derivative doesn’t have to actually own the underlying asset, and in many cases the buyer never owns the asset directly either. Derivatives provide exposure to the asset’s value rather than trading it directly.

Derivative Example

A derivative contract, such as a call option, grants the options buyer the right, but not the obligation, to purchase shares of a particular stock at a predetermined price of $1,000 per share (the strike price) within a six-month period (the expiration). The standard options contract is for 100 shares.

The appeal of this strategy, and the appeal of derivatives in general, is that the buyer is able to purchase the right to buy the underlying asset, at the strike price, on or before the expiration — and only pay the cost of the contract, which is the premium. In other words, options (like other types of derivatives) enable investors to make bigger trades than they could with just cash.

Types of Derivatives

There are two categories of derivatives: obligation-based contracts and option-based contracts. Obligation-based contracts include swaps and futures. These form an obligation between both parties to fulfill the terms of the agreement.

Option contracts give the parties the right, but not necessarily the obligation, to fulfill the contract transaction.

Options

Options are a common type of derivative that give traders the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a set time frame. Since the value of an option contract depends on the price movements of the underlying asset, it’s considered a derivative.

Traders use options for speculation or to hedge against potential losses, but they carry risks, including the possibility of losing the premium paid upfront (for buyers), and the potential for significant losses, particularly for uncovered (naked) option sellers.

Futures

With futures contracts, the buyer and seller set a price for the future exchange of an asset or commodity. The contract includes the price, the amount, and the future settlement date. The contract obligates both parties to fulfill the contract.

Traders are required to deposit margin funds, which is a fraction of the contract value. They may also need to post additional funds, known as maintenance margin, to cover potential losses.

Once the contract is entered into, the price of the underlying asset is tracked daily, and any gains or losses are added to or removed from the trader’s account until the contract is sold or expires. Futures contracts are traded on regulated exchanges, while similar contracts, known as forwards, are sold over the counter (OTC), allowing for more negotiation but less regulatory oversight.

Swaps

Swaps are contracts traded over the counter for the exchange of financial terms or cash flows such as interest rates and currencies.

Companies can swap types of interest rates in order to get better terms. Often, one rate is variable and the other rate is fixed.

With currency swaps, companies can invest overseas with a lower risk of exchange rate fluctuations.

What Is Margin?

Margin requirements for derivatives trading differ somewhat from standard margin trading in stocks. In futures trading, traders must deposit an initial margin, which is a fraction of the total contract value, to open a position. They may also need to post maintenance margin to cover potential losses if the trade moves against them.

In options trading, margin requirements depend on whether an investor is buying or selling an option. Buyers pay a premium upfront, while sellers (writers) may need to post margin to ensure they can fulfill their obligations if the option is exercised.

Swaps may also involve margin requirements, particularly in over-the-counter markets, to mitigate counterparty risk. The specifics vary based on the contract terms and the regulatory environment.

How Derivative Trading Works

A derivatives contract says that the investor will either earn or pay money related to the underlying asset. Although there is an initial cost for the derivative contract, traders may be required to contribute additional maintenance margin if the underlying asset moves against their position.

Once a derivative contract is entered into, the buyer can either hold onto it until the expiration date when they purchase the asset at the agreed upon price, or they can sell the contract to someone else, potentially for a profit. Trading one derivative for another one prior to the contract end date is common.

Generally the contract will sell for only a tiny amount of the value of the underlying asset, but the value of the contract can fluctuate along with the underlying asset price fluctuations — and as the expiration date draws closer.

There is a small initial deposit required to enter into the contract. This amount varies depending on the type of derivative and market conditions. For example, there could be a contract to purchase 100 shares of a stock for $3,000 per share, and the option contract might trade at a premium of $3 per share.

Before entering into a derivative contract, it’s important to understand how derivatives work and read what the contract entails, including the disclosure statement. There will be an agreement to sign stating that both parties have read and understand the terms.

Trading derivatives also requires ongoing work and attention. Markets can change quickly, and there may be obligations throughout the contract period, such as tracking the value of the underlying asset.

Costs

Derivative contracts come with various costs depending on the type of contract and the market where they are traded. Common costs include:

• Options: Premiums, commissions, and potential assignment fees

• Futures: Initial margin, maintenance margin, and exchange fees

• Swaps and Other OTC Derivatives: Transaction fees and counterparty costs

Derivatives are best suited for experienced investors who understand the potential risk of loss involved. Consider consulting with a financial professional to understand the full costs for specific trades.

💡 Quick Tip: When people talk about investment risk, they mean the risk of losing money. Some investments are higher risk, some are lower. Be sure to bear this in mind when investing online.

Pros and Cons of Trading Derivatives

There are several pros and cons to trading derivatives. Some of the main ones are:

Pros

Derivatives traders enjoy several advantages, including:

• A hedge against the risk of future losses

• An opportunity for speculation

• Exposure to an asset without having to purchase it

• Can help predict future cash flows

• Provides the ability to lock in prices

Cons

In addition to the advantages, there are several drawbacks that derivatives traders should understand.

• Trading derivatives is very complex and can be risky for inexperienced traders

• The derivative contract may not be liquid or easily sellable on the open market

• There is a risk of losing more than you invest

• Online scams in derivatives trading are common, adding to the risk

• There are fees and costs associated with the contract

• There may be ongoing maintenance and time commitment required

Financial Derivatives Regulations

Regulations around derivatives vary depending on where they are traded. The Securities and Exchange Commission regulates derivatives traded on registered national securities exchanges, while over-the-counter (OTC) derivatives are typically subject to less oversight and may involve bilateral agreements between parties.

In the latter case, the parties negotiate the terms of contracts on their own. Sometimes these parties include banks and financial institutions regulated by the SEC. Futures brokers and commercial traders must be registered with the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC).

The Chicago Board Options Exchange (CBOE) is the most well known options exchange platform and is regulated by the SEC. These regulating bodies help to prevent fraud and abusive trading practices and promote fair, orderly markets.

The Takeaway

Derivatives can be a riskier type of investment but they can provide value to both institutional and retail investors’ portfolios when used appropriately, and with a clear understanding of the risks involved. Trading derivatives requires more work than simply buying and selling more traditional securities, but the additional risk and additional work can also yield greater rewards.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

Explore SoFi’s user-friendly options trading platform.

Photo credit: iStock/fizkes

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q125-062

Mar

2025

Swing Trading Explained

By Inyoung Hwang | Growing Wealth, invest, Investing, Terminology | Comments Off

What Is Swing Trading?

Short-term price fluctuations in the market are known as swings, and swing trading aims to capitalize on these price movements, whether up or down.

The swings typically occur within a range, from a couple of days to a couple of weeks. Traders may try to capture a part of a larger price trend: for example, if a price dips, but a rebound is expected.

While day traders typically stay in a position only for minutes or hours, swing traders typically invest for a few days or weeks. Swing trading can be profitable, but it’s higher risk, and it’s important to bear in mind the potential costs and tax implications of this strategy.

Key Points

• Swings in the market are short-term price fluctuations that typically occur over a couple of days or a couple of weeks.

• Swing traders aim to capitalize on these price movements, whether up or down.

• Swing trading is distinct from day trading, which takes place during an even shorter time frame — minutes or hours.

• Swing trading can be profitable for experienced traders, but it’s extremely high risk.

• Would-be swing traders also need to bear in mind the fees and tax implications of this strategy.

How Swing Trading Works

Swing trading can be a fairly involved process, and traders employ different types of analysis and tools to try and gauge where the market is heading. But for simplicity’s sake, you may want to think of it as a method to capture short-to-medium term movements in share prices.

Investors are, in effect, trying to capture the “swing” in prices up or down. It avoids some day trading risks, but allows investors to take a more active hand in the markets than a buy-and-hold strategy.

With that in mind, swing trading basically works like this: An investor uses an online brokerage (or a traditional one) to buy a stock, anticipating that its price will appreciate over a three-week period. The stock’s value does go up, and after three weeks, the investor sells their shares, generating a profit.

Conversely, an investor may want to take a short position on a stock, betting that the price will fall.

Either way there are no guarantees, and swing trading can be risky if the stocks the investor holds move in the opposite direction.

Generally, a swing trader uses a mix of technical and fundamental analysis tools to identify short- and mid-term trends in the market. They can go both long and short in market positions, and use stocks, exchange-traded funds (ETFs), and other securities that exhibit pricing volatility.

It is possible for a swing trader to hold a position for longer than a few weeks, though a position held for a month or more may actually be classified as trend trading.

Cost and Tax Implications

A swing trading strategy is somewhere in between a day-trading strategy and trend-trading strategy. They have some methods in common but may also differ in some ways — so it’s important to know exactly which you plan to utilize, especially because these shorter-term strategies have different cost and tax factors to consider.

Frequent trades typically generate higher trading fees than buy-and-hold strategies, as well as higher taxes. Unless you qualify as a full-time trader, your short-term gains can be taxed as income, rather than the more favorable capital gains rate (which kicks in when you hold a security for at least a year).

Recommended: Stock Trading Basics

Day Trading vs Swing Trading

Like day traders, swing traders aim to capture the volatility of the market by capitalizing on the movements of different securities.

Along with day traders and trend traders, swing traders are active investors who tend to analyze volatility charts and price trends to predict what a stock’s price is most likely to do next. This is using technical analysis to research stocks — a process that can seem complicated, but is essentially trying to see if price charts can give clues on future direction.

The goal, then, is to identify patterns with meaning and accurately extrapolate this information for the future. The strategy of a day trader and a swing trader may start to diverge in the attention they pay to a stock’s underlying fundamentals — the overall health of the company behind the stock.

Day traders aren’t particularly interested in whether a company stock is a “good” or “bad” investment — they are simply looking for short-term price volatility. But because swing traders spend more time in the market, they may also consider the general trajectory of a company’s growth.

Pros and Cons of Swing Trading

thumb_up

Pros:

• May be profitable

• Strategy can be used with a range of securities

• Strategy is flexible, can help traders avoid unwanted price movements

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Cons:

• Expenses & taxes can be high

• Time intensive

• Best for experienced traders

Pros of Swing Trading

To understand the benefits of swing trading, it helps to understand the benefits of long-term investing — which may actually be the more suitable strategy for some investors.

The idea behind buy-and-hold strategies is quite simply that stock markets tend to move up over long periods of time, or have a positive average annual return. Also, unlike trading, it is not zero-sum, meaning that all participants can potentially profit by simply remaining invested for the maximum amount of time possible.

1. Time and Effort

Further, long-term investing may require less time and effort. Dips in the market can provide the opportunity to buy in, but methodical and regular investing is generally regarded higher than any version of attempting to short-term time the market.

Swing trading exists on the other end of the time-and-effort continuum, although it generally requires much less effort and attention than day trading. Whereas day traders must keep a minute-by-minute watch on the market throughout the trading days, swing trading does not require that the investor’s eyes be glued to the screen.

Nonetheless, swing trading requires a more consistent time commitment — and an awareness of external events that can impact prices — than buy-and-hold strategies.

2. Income

Compared to long-term investing, which comes into play with retirement accounts like a 401(k), traditional IRA or Roth IRA, swing trading may create more opportunity for an investor to generate income.

Most long-term investors intend to keep their money invested — including profits — for as long as possible. Swing traders are using the short-term swings in the market to generate profit that could be used as income, and they tend to be more comfortable with the risks this strategy typically entails.

3. Avoidance of Dips

Finally, it may be possible for swing traders to avoid some downside. Long-term investors remain invested through all market scenarios, which includes downturns or bear markets. Because swing traders are participating in the market only when they see opportunity, it may be possible to avoid the biggest dips.

That said, markets are highly unpredictable, so it’s also possible to get caught in a sudden downturn.

Cons of Swing Trading

Though there is certainly the potential to generate a profit via swing trading, there’s also a substantial risk of losing money — and even going into debt.

1. Expenses & Taxes

It can be quite expensive to swing trade, as noted above. Although brokerage or stock broker commissions won’t be quite as high as they would be for day traders, they can be substantial.

Also, because the gains on swing trades are typically short-term (less than a year), swing investors would likely be taxed at higher capital gains rates.

In order to profit, traders will need to out-earn what they are spending to engage in swing trading strategies. That requires being right more often than not, and doing so at a margin that outpaces any losses.

2. Time Intensive

Swing trading might not be as time-consuming or as stressful as day trading, but it can certainly be both. Many swing traders are researching and trading every day, if not many times a day. What can start as a hobby can easily morph into another job, so keep the time commitment in mind.

3. Requires Expertise

Within the investing community, there is significant debate as to whether the stock market can be timed on any sort of regular or consistent basis.

In the short term, stock prices do not necessarily move on fundamental factors that can be researched. Predicting future price moves is nothing more than just that: trying to predict the future. Short of having a crystal ball, this is supremely difficult, if not impossible, to do, and is best suited to experienced investors.

Swing Trading Example

Here’s a relatively simple example of a swing trade in action.

An investor finds a stock or other security that they think will go up in value in the coming days or weeks. Let’s say they’ve done a fair bit of analysis on the stock that’s led them to conclude that a price increase is likely.

Going Long

The investor opens up a position by purchasing 100 shares of the stock at a price of $10 per share. Obviously, the investor is assuming some risk that the price will go down, not up, and that they could lose money.

But after a week, the stock’s value has gone up $1, and they decide to close their position and sell the 100 shares. They’ve capitalized on the “swing” in value, and turned a $100 profit.

Of course, the trade may not pan out in the way the investor had hoped. For example:

• The stock could rise by $0.50 instead of $1, which might not offer the investor the profit she or he was looking for.

• The stock could lose value, and the investor is faced with the choice of selling at a loss, or holding onto the stock to see if it regains its value (which entails more risk exposure).

Going Short

Swing traders can also take advantage of price drops and short a stock that they think is overvalued. They borrow 100 shares of stock from their brokerage and sell the shares for $10 per share for a total of $1,000 (plus any applicable brokerage fees).

If their prediction is correct, and the price falls to $9 per share, the investor can buy back 100 shares at $9 per share for $900, return the borrowed shares, and pocket the leftover $100 as profit ($1,000 – $900 = $100).

If they’re wrong, the investor misses the mark, and the price rises to $11 per share. Now the investor has to buy back 100 shares for $11 per share for a total of $1,100, for a loss of $100 ($1,000 – $1,100 = -$100), not including fees.

Swing Trading Strategies

Each investor will want to research their own preferred swing trading strategy, as there is not one single method. It might help to designate a specific set of rules.

Channel Trading

One such strategy is channel trading. Channel traders assume that each stock is going to trade within a certain range of volatility, called a channel.

In addition to accounting for the ups and downs of short-term volatility, channels tend to move in a general trajectory. Channels can trend in flat, ascending, or descending directions, or a combination of these directions.

When picking stocks for a swing trading strategy using channels, you might buy a stock at the lower range of its price channel, called the support level. This is considered an opportune time to buy.

When a stock is trading at higher prices within the channel, called the resistance level, swing traders tend to believe that it is a good time to sell or short a stock.

MACD

Another method used by swing traders is moving average convergence/divergence, or “MACD.” The MACD indicator looks to identify momentum by subtracting a 26-period exponential moving average from the 12-period exponential moving average, or EMA.

Traders are seeking a shift in acceleration that may indicate that it is time to make a move.

Other Strategies

This is not a complete list of the types of technical analysis that traders may integrate into their strategies.

Additionally, traders may look at fundamental indicators such as SEC filings and special announcements, or watch industry trends, regulation, etc., that may affect the price of a stock. Trading around earnings season may also present an opportunity to capitalize on a swing in value.

Similarly, they may watch the news or reap information from online sources to get a sense of general investor sentiment. Traders can use multiple swing trading methods simultaneously or independently from one another.

Swing Trading vs Day Trading

Traders or investors may be weighing whether they should learn swing trading versus day trading. Although the two may have some similarities, day trading is much more fast-paced, with trades occurring within minutes or hours to take advantage of very fast movements in the market.

Swing trading, conversely, gives investors a bit more time to take everything in, think about their next moves, and make a decision. It’s a middle ground between day trading and a longer-term investing strategy. It allows investors to utilize some active investing strategies, but doesn’t require them to monitor the markets minute by minute to make sure they don’t lose money.

Swing Trading vs Long-Term Investing

Long-term investing tends to be a lower risk strategy in general. Investors are basically betting that the market will trend higher over the long term, which is typically true, barring any large-scale downturns. But this strategy doesn’t give investors the opportunity to really trade based on market fluctuations.

Swing trading does, albeit not as much as day trading. If you want to get a taste for trading, and put some analysis tools and different strategies to work, then it may be worth it to learn swing trading.

Is Swing Trading Right for You?

Whether swing trading is a smart investing strategy for any individual will come down to the individual’s goals and preferences. It’s good to think about a few key things: How much you’re willing to risk by investing, how much time you have to invest, and how much risk you’re actually able to handle on a psychological or emotional level — i.e., your risk tolerance.

If your risk tolerance is relatively low, swing trading may not be right for you, and you may want to stick with a longer-term strategy. Similarly, if you don’t have much to invest, you may be better off buying and holding, effectively lowering how much you’re putting at risk.

The Takeaway

Swing traders invest for days or weeks, and then exit their positions in an effort to generate a quick profit from a security’s short-term price movements. That differentiates them from day traders or long-term investors, who may be working on different timelines to likewise reap market rewards.

There are also different methods and strategies that swing traders can use. There is no one surefire method, but it might be best to find a strategy and stick with it if they want to give swing trading an honest try. Be aware, though, that it carries some serious risks — like all stock trading.

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FAQ

Is swing trading actually profitable?

Swing trading can be profitable, but there is no guarantee that it will be. Like day trading or any other type of investing, swing trading involves risk, though it can generate a profit for some traders.

Is swing trading good for beginners?

Many financial professionals would likely steer beginning investors to a buy-and-hold strategy, given the risks associated with swing or day trading. However, investors looking to feel out day trading may opt for swing trading first, as they’ll likely use similar tools or strategies, albeit at a slower pace.

How much do swing traders make?

It’s possible that the average swing trader doesn’t make any money at all, and instead, loses money. It depends on their skill level, experience, market conditions, and a bit of luck.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN-Q125-045

Mar

2025

Robo-Advisor Fees: Comparing Costs and What You Need to Know

By Inyoung Hwang | Growing Wealth, invest, Investing | Comments Off

Robo-advisor services are known for offering lower fees than traditional wealth managers, but the cost of investing with an automated platform also includes underlying expenses investors need to consider. In addition, different robo platforms may charge different fees.

Typical management fees range between about 0.20% to 0.30% annually, and investment costs add on roughly another 10 to 50 basis points. The amount of money an investor puts into the robo-advisor, or the minimum balance, also often dictates how much the fee rate is.

Key Points

• Robo-advisors offer lower fees compared to traditional financial services.

• Fees include management, expense ratios, and brokerage costs.

• Management fees typically range from 0.20% to 0.30% annually.

• Minimum balance requirements affect costs and access to services.

• Additional services like automatic rebalancing and tax-loss harvesting may incur extra fees.

Understanding How Robo-Advisors Work

Robo-advisors are computer algorithms that generate automated portfolios for consumers. Robo-advisor fees are listed as a percentage of the assets under management, but also include the expense ratios of the funds in the portfolio, as well as any brokerage fees.

Here’s how robo-advisors work: While the term robo-advisor can mean different things depending on the company that offers the service, investors usually fill out an online questionnaire about their financial goals, risk tolerance, and investment time frames.

On the back end, a computer algorithm then recommends a portfolio of different securities based on those parameters. The portfolio is pre-set, typically with an allocation that’s either more aggressive or more conservative based on the person’s preferences.

A portfolio for someone nearing retirement age would typically have a different allocation versus a portfolio for someone in their 20s, for example. Depending on these details, the service might automatically rebalance the portfolio over time, execute trades, and may even conduct tax-loss harvesting. SoFi’s automated portfolio does offer automatic rebalancing, but not automatic tax-loss harvesting.

First launched in 2008 or 2009, the robo-advisor industry has expanded rapidly in the last 15 or so years.

How Robo-Advisor Fees Work

Robo-advisor fees are calculated using the expense ratios of the underlying funds, and the percentage of assets subtracted each year for costs associated with managing the investment.

In recent years, expense ratios in the asset-management world have been pressured lower as cheaper index-tracking competitors have flooded the market. That’s arguably a benefit of ETFs that some investors have experienced.

Today’s robo-advisor platforms generally charge management fees of around 0.25% to 0.5% on an annual basis, which is typical for the industry. But investors will encounter a wide range of fees from robo advisors, owing to the investments used by that company to build their portfolio offerings.

Expense ratios can range from a few basis points to half a percentage point on top of the management fee.

Minimum balance requirements, as well as additional features like automated rebalancing or access to a live advisor, can also play into the cost you’re going to pay.

💡 Recommended: What Are ETFs and How Do They Work?

Other Factors to Consider About Robo-Advisors

When picking a robo-advisor, investors can consider several factors like minimum balance, historical performance returns, as well as benefits such as automated rebalancing, and access to a human advisor (which is typically limited on these platforms, or depending on how much money you’ve invested).

In addition to the management fees, some robo-advisors typically charge a brokerage and a set-up fee as well. The ETFs within each portfolio have their own expense ratios that add to the cost of investing.

Tax implications may also be a consideration. Some robo platforms offer automatic tax-loss harvesting, which may help a portfolio to be more tax efficient. (Note that SoFi does not offer tax-loss harvesting at this time.)

Why Are Robo-Advisor Minimum Balances Important?

Minimum balances are important in the asset-management industry because they can be the gate-keeper to individuals who want to entrust money with a financial advisor. Traditional asset management firms often have large minimum balance requirements for clients. At the high end, private wealth managers could require minimums of $5 million.

The reason being that traditional wealth management advisors offer their clients a well-coordinated team of professionals (e.g. tax accountants, estate planners, and so on).

The opposite is true of automated platforms. Robo advisors rely on an algorithm, charge lower fees and have lower minimums, but they provide few, or very limited additional services other than the automated portfolio itself.

The lower minimum balances of robo-advisors have opened the door for newer or younger investors who may not have yet grown their investable assets, and whose financial needs may not be complex.

The minimum balances are also intrinsically tied to how robo-advisors make money, since the annual management fees is a percentage taken from an investor’s assets under management. The automated portfolio, which is usually made up of low-cost index funds and ETFs, also includes the expenses of those underlying funds.

Robo-Advisor Fee Comparison

Here are the fees and tiered fee structures of some robo-advisors compiled from the latest Robo Report, published by Condor Capital, as of March 2025.

Robo-Advisor	Advisory Fees (does not include expense ratio of underlying funds or other costs)	Minimum Balance
Acorns	$3/month for Bronze $6/month for Silver $12/month for Gold	No minimum
Ally Financial	0.30% annually; no management fee for cash-enhanced portfolio	$100
Axos Invest	0.24%	$500
Betterment	$4/month or 0.25% annually for $20,000 on deposit (or $250 monthly deposits); 0.40% for premium	Digital: no minimum; Premium: $100,000
E*Trade Core	0.30% annually	$500
Ellevest	$5 or $9/month based on tier level	Digital: no minimum; Private Client: $500,000
Fidelity Go	no fee for balances less than $25,000; 0.35% for balances $25,000 and above	No minimum; access to live advisory services: $25,000 min.
FutureAdvisor	0.50%	$5,000
Empower (Personal Capital)	0.89%; tiered pricing at higher asset levels	$100,000
Schwab	Intelligent Portfolios: No fee (digital only); Intelligent Portfolios Premium: $300 initial planning fee, $30/month subscription	Intelligent Portfolios: $5,000; Intelligent Portfolios Premium: $25,000
SigFig	No fee for first $10,000; 0.25% annually for balance over $10,000	$2,000
SoFi	0.25% annually	$50
TD Automated Investing	Automated Investing: 0.30% plus minimum account fee of $75/year. Automated Investing Plus: 0.60% plus minimum account fee of $250/year	Automated Investing: $1,000; Automated Investing Plus: $25,000
Titan Invest	1% annually for $10,000 or more; $5 monthly for $10,000 or less	$100 for Titan Flagship; $10,000 for Titan Opportunities and Titan Offshore
USBank Automated Investor	0.24%	$1,000
Vanguard Digital Advisor	0.20% annually [includes underlying fund fees and management fees]	$100
WellsFargo	0.35% [discounted pricing may be available]	$500
Zacks Advantage	0.70%; discounted tiered pricing with higher deposits	$25,000

Source: Backend Benchmarking

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Robo-Investing For High-Net-Worth Individuals

The table above shows several examples of tiered fee structures where robo-advisors have higher minimums. Such robo-advisors may be targeting high-net-worth individuals (HNWI), or investors who have a liquid net worth of $1 million or more.

Traditionally, HWNI have been targeted by private wealth managers but robo-advisors have also marketed to them, particularly millennial HNWI. Robo-advisors can be an automated alternative to the face-to-face tailored financial advice and planning that private wealth managers typically offer to such consumers.

The Takeaway

Robo-advisors are famous for their rock-bottom fees. However, investors will find that there’s actually a wide range in costs and how robo-advisors charge for their services. The minimum balances investors are required to make can determine what sort of fees investors pay. Many robo platforms offer tiered pricing, depending on how much money is on deposit.

Investors will also pay additional fees for the cost of investing in ETFs and a potential set-up payment. Investors often pay extra for services such as portfolio rebalancing, tax-loss harvesting and educational opportunities.

Ready to start investing toward your future, but want some help? You might consider opening an automated investing account with SoFi. Whether you're interested in investments for your traditional brokerage or IRA account, you can access personalized, expert-curated recommendations and automatic monitoring, trading, and rebalancing. With a robo advisor from SoFi Wealth, you'll get a professionally managed portfolio aligned with your goals.

Advisory services provided by SoFi Wealth LLC, an SEC-registered investment advisor.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q125-029

Buy Low, Sell High Strategy: An Investor’s Guide

What Does It Mean to “Buy Low, Sell High”?

4 Tips on How to Buy Low and Sell High

1. Investing with the Business Cycle

2. Look at Stock Pricing Trends

3. Use Moving Averages

4. Beware of Investor Bias

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Pros and Cons of Buy Low, Sell High

Benefits of Buy Low, Sell High

Disadvantages of Buy Low, Sell High

Alternatives to Buy Low, Sell High

Investing with SoFi

FAQ

Is buying low and selling high a good strategy?

Is it illegal to buy low and sell high?

Why do you sell high and buy low?

Understanding the Coupon Rate of a Bond

What Is the Coupon Rate?

The Role of Coupon Rates in Bond Investments

Example of a Bond’s Coupon Rate

History of the Term Coupon

Calculating the Coupon Rate

Step-by-Step Calculation of the Coupon Rate

The Impact of Market Interest Rates on Coupon Rates

How Interest Rate Fluctuations Affect Bonds

Strategies for Investors in a Changing Rate Environment

Understanding Coupon Rate vs. Yield

Coupon Rate vs. Yield to Maturity

Coupon Rate vs Interest Rate

Variable-Rate and Zero-Coupon Bonds

Fixed vs. Variable Coupon Rates and Investment Impact

Zero-Coupon Bonds Explained

The Takeaway

What Is a Derivative?

How Does a Derivative in Finance Work?

Derivative Example

Types of Derivatives

Options

Futures

Swaps

What Is Margin?

How Derivative Trading Works

Costs

Pros and Cons of Trading Derivatives

Pros

Cons

Financial Derivatives Regulations

The Takeaway

Swing Trading Explained

What Is Swing Trading?

How Swing Trading Works

Cost and Tax Implications

Day Trading vs Swing Trading

Pros and Cons of Swing Trading

Pros:

Cons:

Pros of Swing Trading

1. Time and Effort

2. Income

3. Avoidance of Dips

Cons of Swing Trading

1. Expenses & Taxes

2. Time Intensive

3. Requires Expertise

Swing Trading Example

Going Long

Going Short

Swing Trading Strategies

Channel Trading

MACD

Other Strategies

Swing Trading vs Day Trading

Swing Trading vs Long-Term Investing

Is Swing Trading Right for You?

The Takeaway

FAQ

Is swing trading actually profitable?

Is swing trading good for beginners?

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your needs and risk level.

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