What is Swing Trading The Stock Market

Swing trading is the opposite of day trading. Swing traders are those who speculate longer terms on the prices of stocks and futures, etc. This is a style of trading whereby the goal is to capture gains in a stock within a period of one to four days. This type of trade can be held for days, weeks, or in some cases even months. Swing traders take advantage of technical analysis in order to search for stocks that have short-term price momentum. The fundamental or intrinsic value of stocks is of no interest to a swing trader.

Swing trading is the opposite of day trading. Swing traders are those who speculate longer terms on the prices of stocks and futures, etc. This is a style of trading whereby the goal is to capture gains in a stock within a period of one to four days. This type of trade can be held for days, weeks, or in some cases even months. Swing traders take advantage of technical analysis in order to search for stocks that have short-term price momentum. The fundamental or intrinsic value of stocks is of no interest to a swing trader. Instead what are important are the price trends of the stocks as well as the patterns of them.

Swing trading is sometimes described as being a type of fundamental trading in which the positions are held for a longer span of time than a day. However this is sometimes thought of as an oversimplification of swing trading. Looking at it in a more realistic light, swing trading falls somewhere in between day trading and trend trading.

An investor involved in day trading will hold a stock from a few seconds or a few minutes up to a few hours but for never more than a day.  On the other hand a trend trader will take a close look at the long-term fundamental trends of an index or stock for a particular span of time (be it a few days to two to three weeks) and they will then decide to trade a stock based on its intra-week or intra-month oscillations between the optimistic point of view and the pessimistic point of view (this is also known as buy and hold trading). 

To break it down to the simplest of terms possible, swing trading is one style of trading. Many investors feel that it makes “trading the best business in the world.” Only after trying it yourself will you be able to decide if you agree with this statement. The three main styles of trading include swing trading, day trading and buy and hold trading. Each style was described previously.

Those who swing trade generally hold a trade for anywhere from one to four days. Swing traders hold a trade for less than a week’s time. This does not mean that you are not permitted to hold a trade for longer than that. This is just a general swing trader’s rule of thumb.

There are some markets that are more conducive to swing trading than others. What is important if you choose to swing trade forex markets is that you trade the right currency pair. Bear in mind that swing traders must learn to ride the oscillations or swings (thus the name) that the markets make.  Be aware that stocks or currency pairs can pivot from one price level to another very rapidly. This can be very difficult to predict for any investor.

You may wonder how it is that a swing trader trades. The answer is that swing trading most often involves a trader purchasing in the direction of the major trend in investing at the current time. Most swing traders as a general rule do not trade against the overall trend.  They hold their trades over a number of days in a row and watch the higher frame charts both when they are monitoring their trades as well as placing their trades. The higher frame charts are one hour and higher.

There is more than one way that a swing trader can place a trade in the direction that is focused on the major trend. The most common practice of all is to wait for the price to retrace itself before and then enter the trade before it continues in an upwardly mobile direction.