Swing Trading – Swing Trading Meaning, Advantages & strategies


Many of you must’ve come across traders with gleaming profits, flaunting it day in and day out. And also, with traders having bad days, cursing their hearts out. And there must’ve been talks about trading strategies if you ever eavesdropped or participated in a conversation between traders. Or you’re one of those curious people surfing on the internet and randomly hitting the keyword “swing trading”.

What is Swing Trading?

Swing trading is a trading strategy that utilizes swings in the market value to strike out a profit. It is a speculative trading strategy where traders attempt to generate small profit from multiple trades over a period of a few days or weeks. 

The catch point: While other traders’ weather a market trend risk for a long period for a potential profit of higher percentage, say 30%, swing traders try to capture small profits, like 5%, weekly. Even these small steady multiple 5%’s can outperform other traders in the long run.

How Swing Trading Works?

This is one of the many trading strategies going around the present time among the traders. This strategy primarily focuses on capturing a chunk of potential price gain and moving on for another similar one. Traders engaging in swing trading majorly use technical analysis to find potential opportunities due to short term nature. Some may further utilize fundamental analysis for deeper price trends and pattern analysis

Swing traders trade on a pre-decided risk/reward basis. After preliminary analysis, they determine the Exit Point and Stop Loss, i.e., the values to stop in case of gain and loss, respectively. A trader engaging in swing trading would usually risk ₹ 100 for a potential gain of ₹ 300. A potential profit of ₹ 50 – ₹ 75 doesn’t really make a favourable risk/reward ratio in swing trading.

Being a fast-paced strategy, the average life of trade in swing trading fluctuates between a few days to weeks. The features of swing trading, thus, position it somewhere in the middle ground of day trading and trend trading. 

What is role of technical analysis in swing trading?

Technical analysis is primarily used by swing traders for spotting potential trading opportunities. This analysis’ basis is that future price movements can be ascertained using past trading activity and price movements.

While utilizing this strategy, traders need to keep a track of a variety of technical indicators and charts. This is the most important step since here the trader determines the possible direction of a stock value. A swing trader can also use them to gain insight into market psychology to further increase their chances of profits.

How important risk management in swing trading?

Risk management is the most essential component in trading. For successful swing trading, traders should choose liquid stocks to ensure ease in trading. They can further diversify their trades among different sectors to ensure that the risk is kept at a minimum.

Most successful swing traders and analysts believe that the key to swing trading is to keep risk at a minimum and reward/risk ratio high. The most desirable reward/risk ratio for a swing trader is said to be around 3:1. A stop-loss measure is very important to manage risk per trade.

Swing trading strategies

There are many strategies devised to determine when to buy or sell based on technical analysis. Some of the common ones are:

  • Using Fibonacci retracement pattern that identifies support and resistance levels and potential reversals
  • Support and resistance triggers
  • MACD (Moving Average Convergence/Divergence) crossovers
  • T-line trading
  • Using Japanese candlestick patterns to identify trading opportunities

Some traders also use moving averages to determine the support and resistance levels of a price range.

Swing trading Vs. Day trading

With so many similarities many people often confuse themselves between swing and day trading. Some of the points of differences are:

  • Trading Frequency

The most remarkable difference between the two is the frequency of trades. While swing traders focus on short term positions, day traders close out their positions at the end of each trading day.

  • Number of transactions

Swing trading is a fast-paced form of trading where each trade lasts days to weeks. Day trading is yet another fast-paced form of trading, one step above swing trading in terms of time. With each trade not lasting for more than a day, the number of transactions in day trading is higher compared to swing trading.

  • Time required

Both forms require time but day trading usually takes up more time than the other. Due to the nature of trade, day traders need to spend a few hours a day while trading and a few more hours for analysis and preparation on each day. Whereas, swing traders don’t need to spend too much time on active trading. They also don’t need to spend time on analysis and preparation every day.

Some of the best swing trading brokers in India

There are many brokers in the market, each one with some of its own unique features. Some of these features may be more beneficial to some than others. 

While traders may have their own preferred broker based on its unique features, the following is a list of brokers determined using crucial parameters for swing trading. The parameters include Swing trading products, brokerage charges, trustability and authenticity.

  • ICICI Direct
  • HDFC Securities
  • Axis Direct
  • 5Paisa
  • IIFL

How Chart Analysis is helping the traders?

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Swing trading is a form of trading for those who have a busy schedule and for those who are a little slow to make the trading decisions. People can day trade and swing trade at the same time. What is important to keep in mind is not to get distracted by the swing trading positions. One should stay focused on the day trading and to stay stick to this, you can swing trades a night before the market opens. 

Frequently Asked Questions

Swing trading capitalizes on multiple small gains over a short period to add on profits rather than a risky long-term investment for a higher profit. The advantage of this strategy is the lower stop loss and short investment period. 

The most remarkable difference between the two is the life of individual trades. While trades in day trading end at the end of the day, trades in swing trading may last a few days to weeks.

Different Swing traders employ different strategies. Some common tools used in swing trading are moving averages, momentum indicators, price range tools etc. 

Large-cap stocks which are actively traded on the major exchange tend to be a better choice for stock trading. Since these stocks often swing between broadly defined high and low points, a swing trader may ride a wave in one direction for a couple of days or weeks and then switch to the opposite side while trading in such stocks.


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