Swing trading focuses on trying to make a profit from stocks that are about to make a short-term change of direction. Swing trading is short term but not on the scale of day traders, typically 1 to 5 days.
Swing traders focus purely on the technical situation of a stock. They are interested only in the stock chart and the momentum (rate of change in the stock price). There is no real interest in the company’s fundamentals or economics in general.
With a mastery of technical analysis this can be a good way of taking advantage of price movement in stocks.
Staying primarily in cash and staying in trades for shorter periods can reduce the risk of loss during correction days in the market.
Trading in and out of stocks too frequently can mean that you miss out on any major medium to longer term gains in stocks or in the market.
If your timing is bad you can lose a substantial amount in a short period of time.
High transaction costs – making so many trades means you have to pay for each transaction, this means you need to make more money per trade to cover the costs of the trade.
Average trade duration
1 to 5 days
Effort to maintain the strategy
High – many trades