Swing Trading refers to the practice of trying to profit from market swings for a minimum of one day and several weeks. Unlike swing traders, traders of the day are usually out in the market in a day and the traders often keep positions for several months. Therefore, in terms of length of keeping a business, swing traders are between businessmen and trend traders of the day.
The target of swing trading is to achieve the share of the potential price move. While some traders look for shaky stocks with lots of movement, others may prefer more cool stock. In either case, swing trading is a process of identifying that the value of an asset is likely to go to the next location, entering a position, and then to capture a portion of the profit from that move.
Pros of Swing Trading
- Require less time then positional trading
- Maximizes the ability of short-term gains by capturing bulk of market swings
- Trader can rely on technical analysis in particular, simplifying the trading process.
Cons of Swing Trading
- Trade positions are subject to market risk overnight and weekends
- Suddenly there may be a lot of damage due to the market’s reversal
- Swing traders often miss long term trends in favor of short-term market moves
- Trades are involved in swing trading, which runs for several days to benefit from anticipated price moves.
- Swing Trading exposes a trader to the risk of overnight and weekends, where the price can vary and open the following session at a very different price.
- Swing traders can take advantage of the risk / reward ratio established on the basis of Stop Loss and Profit Target, or they can take advantage or loss based on the technical indicators or price action movement.