#SwingTradingStrategy

What Is Swing Trading?

Swing trading seeks to generate profits from short- to intermediate-term price movements. Swing traders try to identify pockets of support or resistance, entering when the countertrend ends and the dominant trend resumes.

Unlike day traders, who often make many trades and close out all positions at the end of each day, swing traders look for bigger moves and hold their positions for longer periods.

Key Takeaways

Swing trading targets short- to medium-term price movements over days to weeks.

Technical analysis tools include momentum oscillators such as the Relative Strength Index and the Moving Average Convergence Divergence (MACD) indicator.

Most swing traders are individual traders, not institutional investors.

Madelyn Goodnight / Investopedia

Understanding Swing Trading

The fundamental principle of swing trading comes from the fact that markets rarely go straight up or down. Instead, they swing back and forth as they get to where they're going. Along the way, they establish higher highs and higher lows in an uptrend and lower highs and lower lows in a downtrend. This is due to market psychology, which creates natural swings as traders and investors continuously act and react.

One of the keys to successful swing trading is using technical analysis to understand market cycles and patterns to identify turning points in these counter-trend moves. Commonly used tools include moving averages, momentum oscillators such as the Relative Strength Index, the Moving Average Convergence Divergence (MACD) indicator, and support and resistance levels formed by price action.

Swing traders try to enter positions at key support and resistance levels, with many choosing to wait until the reversal is underway before entering a trade.