In the stock market, there are many types of trading. Here we will discuss What Is Swing Trading? There are many types of traders in the market. Some traders are looking for short-term returns. They used to try the swing trading method. Many advisors describe different thoughts for trading. Swing trading is one of them.
What Is Swing Trading?
Swing trading is another way where traders try to capture short-term returns within a few days or weeks. The buyers hold the stocks for 3 to 5 days or 1 or 2 weeks and get 5% to 10% of returns. Investors use charts to analyze. It is not for long-term investment, so deep analysis is not necessary. This short type of trading is Called Swing Trading. We will discuss What Is Swing Trading?
Swing traders usually use the chart patterns of the stock or may be based on any news of the stock’s company. The traders hold the position for a few days and put a target of 5 % – 10% return. When they make the targeted profit they exit from their position. That’s how swing trading is going.
Objects Of Swing Trading
Swing Trading is basically depends on the stock’s movement. Swing Traders buy a stock and hold more than one trading session, its might be one or two days. The traders set a short target as their require, when target hits they sell the stocks and come out with the profit. This is the general trend of Swing Trending.
Sometimes the traders can’t sell the stocks and they have to wait a long. They hold the position for couple of weeks to couple of months. They will also consider as swing trader.
Who does Swing Trading Work?
Most often the beginners do swing trading unintentionally. They even don’t know What Is Swing Trading? Some short-time investors prefer to trade in Swing trade other than Intraday trading to avoid the high risk. Although all trading is risky. Some small investors also prefer this due to their few amount of capital. They invest a small amount and get a quick 5 % – 8% profit. Many impatient traders can’t hold long for profit, they invest in swing trading. Many weak-hearted people don’t do intraday, so they consider doing swing trading for a short time investment.
What Is Intraday Trading?
Intraday or Day trading is the activity where traders buy stocks and sell them within the trading hours. This is very crucial to put your eyes on your positions, because within a few seconds or minutes the positions changed. It requires time and effort to analyze to predict the movement of the stocks. If you miss the right position to buy or sell, you may fall in big trouble or face loss. The trader costs a minimum quantity as they have opened many positions. So its very important to keep your eyes on all the positions.
Some Indicators For Trading
The traders can’t properly make sense that What Is Swing Trading in stocks? And how does it make? So they use many indicators to indicate the right time to enter or exit. As in this trade, you have to execute the whole trade within a day, it’s highly risky so the entry and exit levels are very important. Some indicators are listed below.
- Simple Moving Average (MA)
- Exponential Moving Average (EMA)
- Moving Average Convergence Divergence (MACD)
- Relative Strength Index (RSI)
- Money Flow Index (MFI)
- Average Direction Index (ADI)
Differences Between Swing Trading & Intraday
All trading is risky like crypto, delivery, options futures, etc. They are all different from each other. Then what is swing trading? or intraday? The basic difference between Swing trading and intraday is the timing of holding positions. Usually, Swing trading holds a minimum of one overnight to a couple of weeks or months. Whereas Intraday executes within the trading hours.
The major swing traders believe that the stocks should take time to make a profit, but day traders can’t consider the risk to hold positions overnight because of the unpredictability of market movement. Swing traders hold the position for bigger market movement, but day traders won’t do so. They do technical analysis, stocks fundamental and identify them and take a day to trade and earn profit or loss.
This comparison table will help you to understand more briefly.
| FEATURES | SWING TRADING | INTRADAY TRADING |
|---|---|---|
| Timing | Holds the positions overnight for a few days or weeks. | Don’t hold, make the trade within the trading hours. |
| Margin | Profit margin not very high but more than intraday. | The profit margin is low as it is for very short term. |
| Analysis | It doesn’t require deep analysis, can be done using a chart pattern. | It requires much analysis because traders must know the market trend for short time. |
| Risk | It is less risky than intraday. | It is the most risky trade. |
| Profit or Loss | Swing traders can wait for bigger move for profit. If | Day traders can’t wait for bigger moves, if they do so it can turn into a huge loss. |
What is Swing Trading? It is already answered. Any type of trading is now easy in India. Anyone can trade on both trading types by having a Demat account.
Benefits and Drawbacks of Swing Trading
Each trading has its benefits and drawbacks. What is Swing Trading? So swing trading also has pros and cons. Swing Traders choose the shorter strategy of trading. They do not use fundamental analysis, most of them are using technical analysis as they hold it for days or weeks. Using the 1-hour or 15-minute chart they look for the entry level, stop loss level, and exit level. Thus they are seeking opportunities to make a profit in a quick time.
Benefits
- It Requires less Timing to gain profit.
- Swing traders have short-time profit potential.
- Traders can rely on chart analysis to simplify.
- Investors can hold the position as long they want as per the movement of the stock.
Drawbacks
- Trade needs to hold the position overnight and it’s risky if stocks open in a gap up or down.
- Sometimes traders may lose long-term profit opportunities.
- Any bad results of stocks or market reversal can make a loss.
Swing Trading Strategies
There are many static ways to make a profit in swing trading. What Is Swing Trading? And what are the basic methods? Traders use many methodologies to capitalize on their trade? Swing trade is that type where you don’t need the fundamental analysis or long-term methods. Traders can trade using the recent chart or trend. Further, they prefer to use the results of the stocks, and market trends. As this is a short-term investment, many investors go with the developing trend movement where they can get easily 3% – 5% returns within a few days. The most favorable risk-reward is, that you put less time in the market and get more profits. What is swing trading in Indian stock market?
Real Live Example Of Swing Trading
This is the real example of What is swing trading? Here you can see the TATA MOTORS stock chart. Using this example we are going to show what is swing trading and how it works?
What Happened Here:
In 1st February, 2021 Indian govt. announced the yearly financial budget. In this budget govt. have added a new old vehicle scrappage policy. This policy offered the car buyers some new facilities. Car buyers will get extra tax rebate and more discount if any buyer give his mor than 20 year old car to the scrapper. Also they will get 4-6% value of the scrapper car.
As a motor vehicle company, TATA Motors will get benefit from the policy. On 1st Feb 2021, TATA Motor’s share price was opened near about 262-269 Rs. After the announcement of the budget, the share price jumped 320 Rs. on the next day. Within one week the price jumped 356 Rs. This rapid move was near about 28% of the profit. If any trader invested 1 lakh, he will get 28,000 Rs. profit.
During this quick movement, many swing traders gained profits. In this type of move, you need to enter in the right position and exit with profit. This is how Swing Trading works. Hope this is good to understand what is swing trading?
Why Choosing Swing Trading?
Discussing all about what is swing trading? , makes you the scene that how it goes? Reading this article many readers find their types of trading or start swing trading. Most of the day traders are experienced in trading and have the capital for intraday trading. As intraday trading is riskier than swing trading. So mostly students or having fewer capital traders or maybe some impatient traders doing swing trading. Many of them have the capital and patience but don’t trade intraday, because they can’t analyze as much for intraday or can’t afford the huge loss in intraday. Also they are afraid of intraday as it has to execute within one day, whereas in swing trading they will have such time.
Final Words
Comparing Swing Trading and Intraday Trading, you should decide what type of trader you want to be. One should know what is swing trading? and what is day trading? After getting this it depends on you what form you choose. Swing trading is much safer than day trading. One person who is experienced and is a full-time trader, they are doing intraday. Because it needs full-time effort and study. On the other hand, swing trading doesn’t require full-time engagement. You can trade in the swing trade method with less time, effort, and risk. I hope this article ” What is swing trading? ” helps you to make understand swing trading.