WHAT IS SWING TRADING?

When we talk about trading in general, we’re talking about a word that encompasses many processes. One of these processes is known as swing trading, which is a special type of trading designed for those willing to take on larger risks in exchange for a larger return. Today, we’ll talk about what swing trading is and the type of traders that should consider this exciting form of trading.

WHAT IS SWING TRADING

As mentioned above, swing trading is a type of trading that takes place in the stock market. Before we get too into detail here, it’s important to keep in mind that swing trading is a highly volatile process. The process involves taking advantage of technical analysis in an attempt to look for stocks that have high short-term price momentum. By analyzing price trends and patterns, swing traders make their money on the swing. This is when a trend comes to an end and high volatility sets in before a new trend is formed.

DIVING DEEPER INTO SWING TRADING

In order to be successful in the process of swing trading, the trader must be agile and have the ability to move quickly. This is because the swing trader makes his money off of volatility. Therefore, the fast paced moves of the market at these times require fast moves by the traders themselves. As a result, institutional traders very rarely practice this form of trading as large institutions generally trade in sizes too large to be able to move in and out of stocks quickly. As a result, this type of trading gives the at home trader a unique ability to exploit short-term movement in the values of stocks without having to worry about competing with the larger, institutional traders.

Ultimately, the goal of a swing trader is to capture a large price move in times of volatile. Because of this, swing traders are careful when it comes to position size as to minimize downside risk. While fundamental analysis is sometimes used, swing traders largely focus on technical analysis, in particular, measurements of momentum in the price of stocks.

WHAT’S THE DIFFERENCE BETWEEN SWING TRADING AND DAY TRADING?

At first glance, it may seem as though swing trading and day trading are very similar. While they are pretty similar, there is one big difference. That difference is in the position holding time. In general, day traders sell their positions before the close of the trading session. On the swing trading side, swing traders will generally hold the position as long as it takes in order to take advantage of the large swing in value they are predicting. This could be hours, days, or even weeks.

WHO SHOULD CONSIDER SWING TRADING

Trading in general is a relatively high-risk notion. At the end of the day, the process involves making predictions that happen in a relatively short period of time. Because no one can tell the future, combined with the fact that predictions with short periods of time to come true are harder to make correctly, trading in general is reserved for those with a large appetite for risk. However, swing traders generally have a larger appetite for risk than the general trading population. This is because along with the general risk associated with trading comes added risk as these types of trades take place during times of high volatility. So, if you’re considering swing trading, make sure that you consider the risks in the process.

FINAL THOUGHTS

At the end of the day, swing trading is nothing more than another trading strategy. In particular, this strategy is designed for those willing to take on a larger risk for the opportunity to earn a higher profit, if the trade proves to be a winning one. However, make no mistake, the risk here is high, so if you’re considering getting involved, do your research and test your strategy first.

This article was written for marketing purposes and does not constitute investment advice. The information in the article represents the general views of our experts and does not take into consideration the personal circumstances, investment experience or financial situation of any reader.