Swing Trading Basics
Swing trading is a style of trading which aims to make profits from a stock, or stocks within one to four days. A good choice for intermediate traders, swing trading falls somewhere between day trading and trend trading.
Swing traders need to act very quickly to find a scenario in which a particular stock has the potential to make advances in such a short period. But, who uses swing trading? Swing trading is usually used by 'at-home' and day traders. This type of trading isn't really suited for large institutions. These groups tend to trade in much larger sizes - ones that can't be moved in and out of stocks fast.
However the sole trader can take advantage of short-term movements of stock in an environment that is virtually free of competitors. Swing traders make use of (for example) swing charting to analyze the markets and pinpoint stocks that have short term price movements. In a nutshell, swing trading is not concerned in the value of a stock. Instead it observes the short term movements of its price.
While swing trading and day trading both watch how stock prices fluctuate over the short-term there is one important difference. Swing traders usually have a little more time in which to hold their stocks before selling. Unlike day traders they can hold stocks overnight or for a few days.
Is swing trading profitable? Swing trading has the potential to out-perform day trading. Of course there is also more risk associated with holding stocks overnight. After the stock floor has closed for the day, any newsworthy events or warnings about earnings could cause drastic movements in a stock's price, resulting in substantial losses.
If you are ready and able to absorb some risk, swing trading could be potentially more lucrative that day trading as a whole. However investors that don't have large amounts of capital would be well advised to stick to day trade.
