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What is Swing Trading and How Does it Work

05 Jan 2023

Traders use several techniques to trade with and to answer the question, “what is swing trading?”, is to say that it is a trading technique that requires patience. In trading circles, traders use an analogy from surfing to describe swing trading, stating that just as surfers wait for the ideal wave to ride, swing traders wait for a stock (or any other asset) to rise to make a fast profit. Of course, this means that swing trading is conducted for short-term gains. 

What is Swing Trading in Stock Market Parlance? 

Swing trading is a method of online trading to make quick gains. The type of trading that it employs is when traders buy a stock and hold it briefly, only to sell it when the price goes up. The stock is typically held, as a result, only from a few days to around two weeks. The goal of swing trading is to make a quick profit due to the change in the stock’s/asset’s price during a short span. 

Know How Swing Trading Works

If you wish to trade in stocks, you should be aware of what is swing trading. Stocks rise and fall in price and this forms the basis of trading. Here’s how the method works:

  • Trends and Patterns - The first strategy that swing traders employ is understanding trends and patterns of stock prices. This is done so that traders can find stocks/assets that are going to drop or rise in price. 
  • Swinging Up or Down - In case traders think a stock is going to ‘swing’ upwards, that is, face a price rise in the next few days, traders buy the stock. They will sell it before it starts to drop or swing downwards. 
  • Weighing Potential Risks - When traders want to know what to look for when swing trading, they weigh risks of future deals. They also take account of potential rewards. For instance, if a swing trader thinks that a stock’s price may double soon, they may take a risk and purchase that stock. However, if they think the price rise is not substantial enough to take a risk, a swing trader will pass on it. 

Concluding Comments

To know what are the best indicators for swing trading, traders may look at previous sequences of prices of stocks rising and falling. When traders retrace stocks and how they have behaved in the past, they can tell how far particular stocks have fallen or risen. These lines are indicators that swing traders use for their selling and buying strategies. Hence, they know that a stock moves within a range, and this tells traders when to buy or sell. You can easily indulge in swing trading on online platforms like Motilal Oswal, giving you the benefit of live trading on its platform. 

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