What is Swing Trading? Definition + The Strategies You Need to Know

swing trade definition

Markets, on the other hand, exist in multiple temporal frames at the same time. As a result, depending on the time span being evaluated, there may be competing trends within a single stock. It’s not unusual for a stock to be in a primary uptrend while also experiencing intermediate and short-term downtrends. To get started with swing trading, you’ll need to open and fund a brokerage account. The time frames you are trading doesn’t determine whether you over-trade or not. If you have a risk of ruin that is zero, mathematically you cannot blow up your account and you will make money.

  • Smaller gains can only produce growth in your portfolio if losses are kept small.
  • We have to get beyond the time frames that cause overtrading notion.
  • To realize a profit, George should exit the trade before the stock price starts swinging downwards.
  • Swing trading is still a fast-paced form of trading but involves making trades over a few days, weeks, or months.

And the fact of the matter is you don’t necessarily have to choose just one or the other. You can create a well-rounded trading strategy using both styles simultaneously. What’s important is that you make the effort to develop a strong trading strategy. Following your strategy, using a stock screener, and knowing when to cut your losses are keys to mitigating your risk. Using support and resistance strategies isn’t just a matter of looking at the chart and saying “yay” or “nay” though. Traders should also use indicators to confirm trends, check out the company’s fundamentals, and follow the news. The RSI is a super popular indicator that can help traders gauge the strength of a trend by measuring its gains and losses to see which way the momentum is swinging.


The best time frame will ultimately depend on your trading strategy. In general, the timeline of the trade should reflect the pattern, event, or indicator that inspired the trade. For example, if a cup and handle pattern takes weeks to form, then the bullish follow-through will likely take more than a day or two to happen. On the other hand, if the relative strength index is oversold on the hourly time frame, then that trade might play out over a matter of days rather than weeks. Neither swing trading nor day trading is necessarily more reliable. Some traders will be better at swing trading, while others will find more consistency with day trading. One small caveat is that, on a long-enough timeline, broad market indexes like the S&P 500 tend to go up.

swing trade definition

Technical analysis involves using data, stock charts, and statistics to spot emerging trends and profitable opportunities. These analyses form the foundation of swing trading due to offering insights into future price fluctuations. Swing trading https://www.bigshotrading.info/ is a trading strategy where traders hold onto positions for a short period in the hope of generating profits through market movements or swings. This strategy is not the same as day trading or position trading, also known as trend trading.

Introduction to Swing Trading

The first key to successful swing trading is picking the right stocks which are often volatile and liquid. swing trade definition The construction company has a market capitalization of $87 billion and an earnings per share of $7.45.

  • Swing trading is one of the most popular forms of active trading, where traders look for intermediate-term opportunities using various forms of technical analysis.
  • By using a combination of indicators and pattern set-ups, both types of traders seek to enter and exits positions for a profit, while managing risk and reward.
  • I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm.
  • Our gain and loss percentage calculator quickly tells you the percentage of your account balance that you have won or lost.
  • The securities are held for seconds or minutes in scalping, whereas those in ST are held for a few weeks or longer.

If the breakout volume can surpass the recent activity, that can be a sufficient confirmation of strength. Sideways action that resists giving up much ground is preferred. High Relative Strength Ratings are a key statistic for limiting your universe to the best prospects.

Swing trading methods

With the golden cross, a short-term moving average crosses the level of a long-term moving average. When you look at Bollinger Bands® overlaid on a stock chart, you can begin to see some information about potential trends. Risk management is one of the most important aspects of trading, so be sure to keep these cons in mind when you’re putting together your trading strategy. Those advantages might sound great, but like everything else, swing trading also has its risks. It’s a fairly low-maintenance approach, but it’s not so relaxed that you’ll lose interest or get lazy about monitoring stocks, which can sometimes happen with longer holds. Why try your hand at swing trading instead of another style of trading?

  • It requires them to enter and exit a trade in a matter of seconds, minutes, or hours in a single day.
  • Swing trading is contingent on market conditions, though there are different trades for every market type.
  • That analysis looks at statistics related to a stock and how it’s traded in both price and volume.
  • Each average is connected to the next to create a smooth line which helps to cut out the ‘noise’ on a stock chart.
  • However, it does necessitate a deep dive into technical analysis on the part of the investor, so a knack for charts and figures is required.
  • In addition,StocksToTrade accepts no liability whatsoever for any direct or consequential loss arising from any useof this information.

A swing trading style, by contrast, may have a few transactions some days and nothing on others. Positions can be checked periodically or handled with alerts when critical price points are reached rather than the need for constant monitoring. This allows swing traders to diversify their investments and keep a level head while investing. The literal distinguishing difference between day trading and swing trading is the overnight event risk factor. Day trading takes no overnight positions, whereas swing trading involves taking overnight position that can span up to several weeks.

Swing Trading Meaning

Choosing day trading or swing trading also comes down to the trader’s personality and preference. To start swing trading, you will need to open up and fund an account with a brokerage. Once you are funded, you can begin placing trades on their platform. Adding on preparation time and chart/trading review means spending at least three to four hours at the computer. If you opt to trade for more than a couple of hours a day, your time investment goes up considerably and becomes a full-time job. Both day trading and swing trading require time, but day trading typically takes up much more time.

swing trade definition

Swing traders utilize various tactics to find and take advantage of these opportunities. The best candidates are large-cap stocks, which are among the most actively traded stocks on the major exchanges.