What is Swing trading??

It is a type of trading which combines fundamental and technical analysis to catch the most significant price movements and avoid trading at idle times. It is mostly a medium-term trading style that requires holding positions open for several days, so you should be patient enough to tolerate the period of time when the price goes against you. The key goal is to identify medium-term trends and enter the market only when there seems to be almost 100% probability of winning.

Swing trading presupposes large price moves and therefore requires a well-judged position size management to minimize downside risks.

Example of a trader

It is not an easy task to find a truly famous swing trader, although there are a lot of coaches and instructors who prefer this trading style. One of the most famous and respected swing traders is Alan Farley who earned a lot on using his swing trading strategies. He is the author of The Daily Swing Trade, the book that offers different tactics and techniques for swing traders. If you decide that this style of trading suits you, you might be interested in reading it

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.

Successful swing traders are only looking to capture a chunk of the expected price move, and then move on to the next opportunity.

Advantages and Disadvantages of Swing Trading

Many swing traders assess trades on a risk/reward basis. By analyzing the chart of an asset they determine where they will enter, where they will place a stop loss, and then anticipate where they can get out with a profit. If they are risking $1 per share on a setup that could reasonably produce a $3 gain, that is a favorable risk/reward ratio. On the other hand, risking $1 only to make $0.75 isn't quite as favorable.