What Is Swing Trading and How to Get Started?

  • December 20, 2018

What is swing trading? Watch our video on learning how to swing trade.

What Is Swing Trading?

  • What is swing trading? Swing trading is a short term version of trading stocks and options. Whereas day trading is done in one day, swing trading takes at least 3-5 days. Sometimes even up to 2 weeks.

Finding the entry and exit on a swing trade might be the most difficult aspect of swing trading. The good news is you don't need perfect timing to make a profit.

The goal of swing trading is to get the bigger price move on a stock than is possible with day trading. When you're day trading you're getting in and out within seconds or hours. With swing trading you're allowing the price action to move over several days.

The swing trading basics is trading the trend. By trading the trend you're capitalizing on the up and down moves. Because you're holding at least over night the daily chart is the best chart to find the trends.

Holding overnight also makes you susceptible to the over night volatility.  Any news that comes after hours can affect price and direction.

When you're wondering what is swing trading an interesting point to note is that the best market to swing trade in is a stable one. You would think that a market that is extreme to the bullish or bearish side would be best but it actually isn't.

One of the pluses of swing trading is being able to ride a stock up and back down. When the market is in an extreme, whether bullish or bearish, stocks aren't in the habit is making those up and down moves.

That might seem surprising. You'd think you'd want that direction. In a bull or bear market momentum carries the stock one direction for a long period of time. You can definitely profit that way though a stable market give you those up and down moves.

Up and down price movements keep a stock from getting overextended. If the price of a stock keeps rising, it will get too expensive to trade. Take our swing trading course for more information.

1. The Right Stock

A key to successful swing trading is picking the right stock. The larger cap stocks a great candidates for because they're traded most often. It's all about supply and demand.

The more the stock is traded the more price moves. In an active market there will be price swings. As a swing trader you ride the wave up and then back down.

What is Swing Trading

Swing trading is all about riding the wave. Ride the wave up and ride it back down for those profits.

2. Technical Analysis and Trends

Technical analysis is imperative to follow when you're asking what is swing trading. Because you're holding a stock more than a day, you need to know the direction it's headed. You can't make a trade just because someone says it'd be a good one.

You need to read the charts and see what they're telling you. Candlesticks are going to give you a sense of direction but moving averages, MACD and RSI are going to paint a more complete picture.

Those technical indicators tell you when something is bullish or bearish. You need to know that in order to know what to buy. Another important thing to know is where there the trend is headed.

What is Swing Trading

The Ichimoku Cloud in another great tool to use when swing trading. Check out our Ichimoku Cloud  post to learn more.

3. Stock and Options: What Is Swing Trading?

There are 2 securities you can take advantage of for swing trading. They are stocks and options. Options are pretty great for swing trading. You can buy calls and puts depending on which direction the market is going.

Stocks are great too but not all brokers have shares to short. Put options are the bearish plays and brokers always have them available. With options you can trade no matter the direction is a stock is going.

4. PDT Rule: What Is Swing Trading?

Everyone has run into the PDT rule is your trading account isn't over $25,000. If you're asking what is swing trading this is a great way to get around  that rule. The Pattern Day Trader or PDT rule only allows for 4 same day sales in a 5 business day time period.

That can catch up with you pretty quickly and before you know it, you're out of trades for the week. That's why swing trading vs day trading is great.

If you buy a stock and hold at least overnight, you're not flagged for the PDT rule. By doing that, you can trade as many times as you'd like. We offer a trading service that teaches how to trade live each day.

Follow the Strategies

What is swing trading is a question asked when you're deciding what kind of trader you want to be. Following swing trading strategies gives you great success in trading.

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