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What is a Swing Trading Technique in Stock Market

The stock market is a massive platform and analysts keep speculating and offering different techniques for an investor to gain the momentum and earn profits during their investment journey. The Swing Trading technique is one such activity wherein the various investment instruments/ vehicles such as, stocks, bonds, indices, currencies or commodities are repeatedly bought or sold depending upon the price volatility the market is experiencing.
In Swing Trading technique the investment is of a short-term, but the duration may vary from 3-4 days to as long as 3-4 weeks. The reason behind the inception of this technique is to lend a helping hand to investors who lack confidence to take risks and also the investors who find it difficult to do the market analysis and observe their investments on a daily basis for a long term.
As this technique is devised to earn profits within a short duration, the investors are advised to invest in more than one stock, especially the ones listed with exchanges like NYSE, NASDAQ and AMEX etc.  Out of the innumerable stock exchanges, experts rely on these 3 exchanges more than any one as they have better chances of acquiring profits within a short span of time.
Another factor which makes Swing Trading activity an interesting phenomenon is that it can function in a stagnant market which does not display a complete bullish or bearish behaviour. So more the market is stagnant, the better performance will be projected (especially during short-term investment) and thus better returns.
Another characteristic feature of this technique is that it takes advantages from the periodical fluctuations in the stock market when the investment with long-term investment strategy will remain silent.

Investors prefer Swing Trading over other trading techniques because:

  • The risk quotient is low.
  • Encourages short-term investment.
  • Encourages novice and part-time traders.

What options to choose in Swing Trading?

  1. It is advised that the investor should pick up stocks from large companies (also known as Large-cap Stocks) as these stocks experience greater fluctuations.
  2. The Swing trading is best suited for a market which is stable rather than a bullish or bearish market (which is unidirectional). In a stable market, the stocks prices would experience a sudden rise (on one day) and a sudden fall (on the other) and this pattern gives strength to Swing trading.