Swing Trading

Swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks. Swing traders primarily use technical analysis to look for trading opportunities.

Swing traders may utilize fundamental analysis in addition to analyzing price trends and patterns.

KEY TAKEAWAYS
- Swing trading involves taking trades that last a couple of days up to several months in order to profit from an anticipated price move.
- Swing trading exposes a trader to overnight and weekend risk, where the price could gap and open the following session at a substantially different price.
- Swing traders can take profits utilizing an established risk/reward ratio based on a stop-loss and profit target, or they can take profits or losses based on a technical indicator or price action movements.

Understanding Swing Trading
Typically, swing trading involves holding a position either long or short for more than one trading session, but usually not longer than several weeks or a couple of months. This is a general time frame, as some trades may last longer than a couple of months, yet the trader may still consider them swing trades.

Swing trades can also occur during a trading session, though this is a rare outcome that is brought about by extremely volatile conditions.

The goal of swing trading is to capture a chunk of a potential price move. While some traders seek out volatile stocks with lots of movement, others may prefer more sedate stocks. In either case, swing trading is the process of identifying where an asset’s price is likely to move next, entering a position, and then capturing a chunk of the profit if that move materializes.