Swing Trading is a type of trading that tries to capture short to mid-term gains in a stock over a few days or weeks. These traders generally use technical analysis for opportunities.
These traders may utilise fundamental analysis to analyse trends and price patterns. This trading usually involves holding a long or short position for more than one trading session.
It is not usually longer than several weeks or months. Some swing trades last longer than several months, and traders consider them swing trades even then.
Swing Trading Objectives:
The Swing Trading technique’s objective is to trade stocks within a short period or a day. The swing trader often finds sticks over trends and enters the trade at the commencement of a trend. In rare cases, traders do try to exit the trade quicker. Holding the trade for more than 2 days or weeks makes swing trading an ideal way to trade in a bear market.
The Two Varieties of Swing Trading Are:
- Counter Trend Swing: Counter Trend Swing is trading resistance or support areas in the direction of the primary trend.
- Trend Following Swing: Selling in resistance and buying in support in direction of a minor trend is called Trend Following Swing.
Opportunities for a Swing Trader
Although Swing traders have several opportunities in a trend, taxes and commissions slashed into profit potential. It is the skill to read the price chart and analyse the footprint of the swing highs and lows. This helps in forecasting price direction correctly. Swing trades are maintained for more than a day, but less than trend trades. The positions are closed within two to three weeks.
A swing trader looks for multi-day chart patterns on websites or a trading app. Some common patterns involve cup a handle pattern, average crossover, flags, triangles, and head and shoulder patterns.
Each swing trader plans and strategies which give them an edge over several trades. This also involves checking trade setups which lead to predictable movements in asset prices. Although there will be various opportunities for Swing trading every week, it may not be profitable most of the time.
Key Points to Remember as a Trader
Swing trading involves handling trades that last a few days to several months, to profit from a price move. This trading exposes the trader to overnight or weekend risk, where the price could gap or open a session at a very different price.
Swing trading indicates trading methodically with a trend. They do not try to make a profit in one shot and instead wait for the stock to hit a profit level, so they could sell. The trading app helps traders trade through a legally registered broker, from anywhere.
Swing trading is one of the most popular forms of active trading, and is a great way to trade in the Indian market. It can give a lot of leverage and return to the investor, with the risk involved. Many traders have lost their money in this, thus studying stocks and shares before trading is essential.