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What Is Swing Trading?

Price swings are a thing that is situated in the heart of the capital markets. Stocks go up and down almost every moment, with some moving up as if they will reach the moon while some drop down like a meteor and some just chill out, moving sideways. But how exactly do traders who proudly call themselves "Swing traders" profit from these moves? What is their trading style and how can you also try swing trading. These are some of the questions we will be answering here today. So, let's not waste time and start with what is swing trading?

What is swing trading?

We all know for a fact that prices of no financial instrument go in a straight direction. Be it up or down, prices always tend to go in swings. That means there always comes a period of retracement or consolidation when the fight between buyers and sellers is the highest.

Now, swing trading is a trading strategy where the buyers or sellers try to profit from the up or down move in an instrument that can last anywhere from several days to weeks to even several months. The idea of swing trading is to capitalise on the large possible moves in the instruments.

But one should always remember that by doing this, he is exposing himself to two additional risks which intraday traders don't face. And those are overnight risks and weekend risks.

How can you learn swing trading?

The very fundamentals of the stock market need to be cleared first before you start trading. Learn about technical analysis. This is because technical analysis is the biggest factor for swing trading. Fundamentals are not a big deal when you are not into stock for a long time.

Advantage of swing trading

  • Compared to intraday trading, one doesn't have to stick to the screen to trade in swings.
  • Swing trading success probability is way more than intraday trading. This can be debatable for some people, but for the masses, this is true simply because you have more time.
  • Traders can try to capitalise on swings completely using technical analysis.
  • No leverage is involved most of the time if you are trading cash. In FnO, leverage will be there but still less than intraday.

Disadvantages of swing trading

  • Traders are exposed to overnight and weekend shocks which may completely draw down their account. News mostly comes after the market, and since the world market is synced, bad news somewhere else may start a chain reaction all over the world the next day without even giving you a chance.
  • Technical analysis is 100% correct. You are exposed to abrupt movement in instruments for a longer period.
  • Swing traders may miss the long-term trend to catch the short-term momentum.

Conclusion

Swing trading is a very profitable strategy, considering you have good decision-making skills and sound technical analysis knowledge. Always do your due diligence before entering any position. As we all know, bulls make money, bears make money, but pigs get slaughtered.


10-05-2022
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