Swing trading is a type of trading strategy that involves holding a position for a period of several days to several weeks, in an attempt to profit from short-term price movements (or “swings”) in the market. Swing traders aim to enter a trade at a low price and sell at a higher price, or enter at a high price and sell at a lower price, depending on the direction of the trend.
Swing traders use various technical analysis tools such as chart patterns, indicators and moving averages to identify short-term trends and potential buying or selling opportunities. They also tend to focus on securities that are likely to experience significant price movements in the short term, such as stocks with high volatility or those that are experiencing a strong upward or downward trend.
Swing trading is considered a medium-term trading strategy, as opposed to day trading, which focuses on much shorter timeframes, or long-term investing, which holds positions for a much longer period. Swing traders typically use a combination of fundamental and technical analysis to make trading decisions.
Swing trading is considered a higher-risk strategy than long-term investing, as it is more difficult to predict short-term price movements, and traders need to be comfortable with the potential for larger price swings. However, it can also offer greater potential for returns if done correctly.