Last Updated on September 1, 2020 by Jason Wilson
Swing trading is a style of trading in which a stock is held for a length of time ranging anywhere from as little as two or three days up to as long as two or three weeks. This particular style is usually used by beginners however more advanced traders have also been known to profit from it.
This type of trading is dependent on short term variations in the market and traders must be able to react to these changes quickly. Swing trading relies more on stress price patterns than actual stock value.
Swing trading is kind of a middle ground between day trading and trend trading. Day trading focuses on the trader holding the stock for no more than a day whereas with trend trading it can be as long as a few weeks or months.
With swing trading the trader does not wait for the price of a stock to hit bottom when buying however he also does not wait for the highest prices when selling either. They focus more on the short term fluctuations in the market. Those engaging in swing trading also do not usually have to worry about competition for large traders.
If a person wants to be successful with swing trading he needs to know how to pick the proper stocks. This usually includes the ones owned by large companies. A swing trader will generally follow a rising stock for a few days and then when it turns downward they simply change over to a different stock that is on an upward swing.
This type of trading is most profitable when markets are stable. Swing trading however is not very successful during times of constant rising or falling with very little fluctuation in stocks as this projects instability in the market making it a much higher risk.
In order to profitably engage in swing trading it is extremely important to understand the different fluctuations and rises and falls in the market and what it all means.
It is very foolish to jump in and try to compete in this market without at least doing a little research first to know which trades might be profitable and which ones will be too risky to be attempted. By knowing this you not only increase your chances of making a profit but you greatly reduce your risk of losing major amounts of money making the risk much less likely to be a waste of time and money.