HomeBytesWhat is meant by swing trading?

What is meant by swing trading?

Have you ever seen a relay race? There are 3-4 racers lined up in a circular structure. The aim of the first racer is to race as fast as possible toward the second racer. The second one aims to reach the third, and so on. When it comes to trading, swing trading works similarly to a relay race. You need to aim for a smaller finish line first, and then strategically progress toward the final finish line.

swing trading

What is swing trading?

Like 0’s and 1’s in coding, there is an uptrend and downtrend in stock markets. If you observe closely, the prices are moving up and down. These patterns are called swings. Traders who trade these movements are called swing traders.

When to swing trade in the market?

Swing trading can be done in any market as long as markets are making swings. But, it is most beneficial when the markets are trending. Your risk-to-reward ratio improves a lot. Imagine yourself in a relay race – it will be easier to run faster if the wind is in the forward direction. Swing traders can trade in either cash or options markets.

Important points for swing trading

  • Technical analysis is very important for a swing trader like marking resistances and support.
  • Stocks with good EPS growth on a quarter-on-quarter basis, good sales growth, and strong quarterly results are a must for swing traders.
  • Swing traders also rely on various technical indicators like MACD, RSI, Stoch RSI, and others.

How to swing trade?

  • The first thing is to identify the trending sector.
  • Second, identify the stocks with good quarterly results from these sectors.
  • Third, mark your resistance and support levels and decide on your time-frame.
  • Next, mark your entry and exit points.
  • Finally, always stick to your strategy, and never copy anyone else’s.

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