Back to basics: What is Swing Trading?

I was looking through the website logs and many people arrived after searching Google for "what is swing trading", so I figured I'll do a lesson on it.

Swing trading falls somewhere between day trading and long-term investing. If you’re interested in trading but don’t want to be glued to a screen all day, this method could work for you.

At its core, swing trading is all about capturing “swings” in price. These swings are shorter than the long-term trends that investors look for, but they last longer than the quick moves that day traders chase. Swing traders aim to ride these price movements over a few days to a few weeks, making profits on those smaller ups and downs without holding onto a stock or asset for months or years. It's a middle ground. You’re not looking for big multi-year gains, but you’re also not aiming to flip everything within a day.

Swing trading relies a lot on technical analysis, where you’re studying charts, price patterns, and indicators to try and predict what a stock or asset will do next. Some of the most popular tools swing traders use:

• Moving Averages: These give you a look at the overall trend. When prices cross certain moving averages, it can hint that an uptrend or downtrend is forming.
• Relative Strength Index (RSI): A tool to see if something’s “overbought” or “oversold,” which can help spot when prices might reverse.
• Candlestick Patterns: Patterns in candlesticks like “hammers” or “dojis” can suggest whether a trend will continue or reverse.
• Support and Resistance Levels: Swing traders like to buy near support and sell near resistance.

You can combine these, or use none of them at all, but you got to come up with entry and exit points, ideally buying at a low point and selling at a higher point, obviously. Many will also set up SL orders in case things don’t go as planned.

Making Money (and Losing It) in Swing Trading

The goal in swing trading is simple: buy low, sell high (or sell high, buy low if you’re shorting). Here’s how people can make—and lose—money in swing trading: