Swing Trading Meaning


Swing traders mostly use temporary price movements to make small profits that cumulate over a long time to yield large gains. However, traders run the risk of overnight price fluctuation of securities and the inability to sell them. As a result, swing trading is subject to market volatility and has higher fees. The main factor differentiating the two techniques is the holding position time.


And it is also not a long-term play, like position trading, in which the trade can be left alone for months, or even years. Now we have reviewed the most popular swing trading strategies, follow the below steps to open an account with us, so you can get started to swing trade stocks. A support level indicates a price level or area on the chart below the current market price where buying is strong enough to overcome selling pressure. As a result, a decline in price is halted and price turns back up again. A stock swing trader would look to enter a buy trade on the bounce off the support line, placing a stop loss below the support line. The Fibonacci retracement pattern can be used to help traders identify support and resistance levels, and therefore possible reversal levels on stock charts.


A good way to experiment with swing trading strategies is with YouHodler’s Multi HODL tool. Multi HODL allows you to long or short any cryptocurrency using a variety of multiplier levels. Set your margin call and take profit levels for more flexibility. Best of all, it’s easy to use and convenient for all experience levels.

For example, in an uptrend, you aim to buy at “swing lows.” And conversely, sell at “swing highs” to take advantage of temporary countertrends. It is ideal for those who can’t monitor their charts throughout the day but can dedicate a couple of hours analyzing the market every night. Anyone with a small investment can trade using ST and make good profits, while scalpers need higher investment to make reasonable profits.

Pros and Cons of Swing Trading

All types of are risky and investors may suffer losses. Past performance of investment products does not guarantee future results. The responsiveness of the trading system may vary due to market conditions, system performance, and other factors.

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As we’ve mentioned, asset prices never develop in a linear trend. Even in a prolonged bullish or bearish period, the trends are often punctuated by instances of short-term price pullbacks. These pullbacks observed in established trends are called price swings. Swing traders simply observe an already established market, then anticipate the price pullbacks. And this is precisely where the ability to read crypto charts proves to be an absolutely essential skill. As two short-term trading strategies, the simple difference between them is holding time.

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Breakout trading is an approach where you take a position on the early side of an UPTREND, and looking for the price to“breakout”. You enter into a position as soon as price breaks a key level of RESISTANCE. Retracement trading involves looking for a price to temporarily reverse within a larger trend.

When opening a position in a stock, you are expecting to capitalize on a short term upswing – but it doesn’t always pan out that way. And if you aren’t careful, you can miss your exit and kiss profits goodbye. With long term investing, on the other hand, you are making more long-term investments into less risky assets that are likely to pan out in the grand scheme of things.


Analyze how the stock or ETF has behaved since the beginning of the trend. Swing traders should select their candidates from the most actively traded stocks and ETFs that show a tendency to swing within broad, well-defined channels. It’s necessary to keep a list of stocks and ETFs to monitor daily and become familiar with the price action of selected candidates.

Sideways that resists giving up much ground is preferred. High Relative Strength Ratings are a key statistic for limiting your universe to the best prospects. And volume gives you confirmation that institutions are accumulating shares. Sometimes prices move a lot in a short period; sometimes they stay within a tight range over a long time, underscoring the market’s always-on fluctuations. A trader can measure their performance as a percentage of the trading channel width.

Prices of currency pairs are influenced by multiple factors on a daily basis, and this provides numerous opportunities to place swing trades. Lower Time Commitment – Compared to day trading, swing trading demands a reduced time commitment. Because they primarily utilise technical analysis, swing traders are only required to watch their charts on daily or 4-hour timeframes. They do not need to watch their charts all day or monitor price action on smaller chart timeframes. Swing trading is, therefore, very accommodative even for traders who have daytime job commitments.

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Learn how to read stock charts and analyze trading chart patterns, including spotting trends, identifying support and resistance, and recognizing market reversals and breakout patterns. And remember, the shorter your time horizon and the more trades you make, the more you’ll rack up in transaction costs. This can water down your overall return, even if your swing trading strategy is otherwise profitable. Swing trading can be a means to supplement or enhance a longer-term investment strategy. Swing trading is one of the few ways traders attempt to capture frequent short-term price movements in a market landscape that tends to evolve at a much slower pace.

  • And if you aren’t careful, you can miss your exit and kiss profits goodbye.
  • Swing trading seeks to capitalize on the upward and downward “swings” in the price of a security.
  • No trading strategy is foolproof and no strategy can ever offer a one-size-fits-all approach to trading profitably.
  • In addition, these strategies have different transaction costs.

Aside from a risk/reward, the trader could also utilize other exit methods, such as waiting for the price to make a new low. With this method, an exit signal wasn’t given until $216.46, when the price dropped below the prior pullback low. This method would have resulted in a profit of $23.76 per share. Thought of another way—a 12% profit in exchange for less than 3% risk. Swing trading can be an ideal source of passive income for traders, but it is not without its advantages and disadvantages.

Real-World Example of Swing Trade in Apple

If you’re looking to make quick profits in volatile markets, then swing trading may be a good fit for you. However, if you’re risk-averse or not interested in the stress of constant monitoring and decision-making, then swing trading may not be right for you. Ultimately, the best way to find out is to experiment with different strategies and see what works best for you. Swing traders identify a possible trend and then hold the trade for a period of time, from a minimum of two days to several weeks. It is a solid basis of price action for buying or selling securities for traders. Volume discloses the actual strength of the ongoing trend of a security.

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance.

Therefore, ST is ideal for extracting from the crest and trough of the momentum in currency trading in the forex market. Simple moving average – It is a type of MA where an average of all the closing prices of a security during a certain time frame is taken into account. The extra time commitment of day trading comes with its own risk. Not having a steady paycheck makes a day trader’s income reliant on trading success. That can add an extra level of stress and emotions to trading, and more emotions in trading lead to poor decisions.

Nevertheless, swing traders should also be able to analyze an asset’s fundamentals to support their technical evaluation. It is a speculative strategy for trading securities in which traders hold a security for a few days or weeks to profit from short-term price changes or swings. However, since their positions remain open for days or weeks, they are exposed to some risks too. The opening price will reflect the shock of any unexpected news. Abrupt changes in the market’s direction also pose a risk, and swing traders may miss out on longer-term trends by focusing on shorter holding periods.

However, it may be difficult to find entry and exit points in a ranging market. Swing trading can be profitable in both trending and range-bound markets. There are many different systems out there, so it’s important to do your research and find one that suits your needs and risk tolerance. However, it’s important to remember that like any other type of trading, there are risks involved. Before getting started, be sure to educate yourself on the risks and potential rewards of swing trading.

This investment style requires a pretty minimal time commitment. And, you can learn swing trading pretty quickly, too – since you only factor in technical analysis. It can be lucrative – bringing in returns of over 50% in a year.

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