Different individuals select various stock trading techniques according to their financial goals (it can be short-term or long-term). Some of them prefer intraday trading, Buy Today Sell Tomorrow (BTST), positional trading and many more. Have you ever wondered there is another way of stock trading, which many people do not know is Swing Trading?
What is Swing Trading?
Swing trading is essentially a trading technique in which the stocks are held for a specific period of time (overnight to 3 – 4 weeks). It cannot be ignored that the stock market is volatile and prices of the shares keep on fluctuating every second. Any individual who keeps a close tab on the market for years may very well know that the market generally moves in trends. The swing traders make use of the technical analysis to keep a close look at the stock market trends.
With the help of the technical analysis & indicators, based on analysis, if a trader believes that the stock price has a potential to move suddenly from the current trend going on in the stock market, then he can trade the stock accordingly.
For example, with the help of the technical analysis, if the trader believes that the stocks prices have a potential to move up suddenly from the normal trend going on in the stock market, then he can buy the stock and if he feels that the shares may not move any further or go down in the coming days, then the shares may be held for more days or sold. There are various methods used by the traders to analyze the trends, which are the Average Directional Index (ADX), Moving Average Convergence Divergence (MACD) and Average True Range (ATR).
And if he believes that the stock may not move any further or go down in the upcoming days, then the shares may be held for more days or sold. There are various methods used by the traders to analyze the trends, which are the Average Directional Index (ADX), Moving Average Convergence Divergence (MACD) and Average True Range (ATR).
Swing trading may be challenging to understand but with patience, one can acquire knowledge and trade easily. In order to do swing trading efficiently, there are some prominent things that have to be taken into consideration, which is as follows:
Pre-Market Research: You must make it a habit of reading the financial newspapers or websites to know about the major trends or news moving the markets. Through this, you will be able to figure out the potential opportunities to trade in the market.
Keeping an Eye on the Following: Besides the news, there are some other important things that you must keep an eye on, which are:
- The market sentiment (whether it is bullish or bearish)
- Economic reports
- Economic or company news
- Government announcement
How Swing Trading is Different from Intraday Trading?
Some people tend to get confused between both the terms. However, there is two major difference between both of them, which are as follows:
- In swing trading, the shares are held overnight to several days or weeks. On the other hand, in intraday trading, the stocks are sold within minutes or before market closing time.
- In intraday trading, the stocks are now allowed to hold overnight and if there is a major news after the closing of the market, then their stocks remain safe from any risks. In swing trading, an overnight or prime time news can lead to unpredictability and may affect the stock prices.
Swing trading can prove to be one of the excellent trading techniques to earn more or extra profits in a short time period. Patience is a virtue in swing trading and hence, it is important that the traders must not neglect the importance of accumulating information or techniques about this kind of trading to ensure that they meet their financial objectives easily.