Swing Trading : Meaning, Strategy, Pros & Cons | Share India
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In the stock market, there are a variety of ways at which you can trade. One of the trades is swing trading. As there are tons of swing trading strategies, with the rise in online trading, the popularity of the swing trade is increasing on a daily basis.   


Swing trading is quick & has predetermined entry and exit positions with trading strategies in place. To achieve swing trading, you need to have technical analysis, critical analysis, and in-depth knowledge about the price movement of securities.  To share a glimpse of swing trading, you need to know that it works in the smaller price movements of a particular asset. So, traders who want to grab the opportunity of smaller movements in the market can learn and apply swing trading strategies on their trade.


What is Swing trading? A Brief About Swing Trading  


A swing trade is a method of trading where traders make a profit from a financial asset’s  price change over a short time interval.  The trading decision will be made based on trend, with  the help of fundamental and technical analysis to identify patterns, and potential changes in trend over a short period.


As the investment of swing traders is for a short time which can take days, or weeks, before exiting the trade. As the trading doesn't follow the market trend such as day traders who consider an immediate trend line  to exit the trade as the situation goes in the opposite direction. Using swing trading  precisely, you can achieve better trades in   less time. 


What is a Swing Trading Strategy?


Traders can use  different swing trading strategies in order to maximize their returns. Traders can use various combinations of technical analysis to form a proper strategy.  Swing trading needs to follow the news/event before making any investments. A swing  trading excludes the trouble of trade against the movement.


A Swing Trading Strategies Are As Follows:


Trend Catching Strategy 


In the trend-catching strategy, traders tend to hold their positions until the trend changes. Swing traders exit a position whenever the target is achieved. Although it's a contradictory concept for swing traders to run after the trend,  as a trader you can still identify the trend's direction for potential gains in short-term trades.


You can get benefits such as good entry and exit points through trend-catching strategies.  But the trend is not constant, so you must monitor the trade accordingly.


Breakout  Strategy 


In the breakout, you can place your trade where the market moves beyond a defined price range. The traders are keen on this strategy and hunt for price breakouts and ideally looking for opening positions at the start of an uptrend. Through this strategy you can take positions early in the uptrend. And as a trader, you can enter a  trade when you can monitor a desired volatility in the stock price of an asset. 


But with the momentum taking off, the profits are significant. The trend is continuing in the stock market. But you must know that the trend highly depends on the support & resistance levels. 


Breakdown Swing Strategy 


Unlike breakdown strategy, here you follow the opposite variant of breakout strategy as you have to go against the momentum. A trader tends to open a short position when an asset’s price breaks below a defined support level, on the early side of a downtrend. As part of effectively using this strategy, a trader is recommended to check on the moving averages & oscillators. As you set a position, the trader can make money  by taking low swings   . As  the breakout and breakdowns share very similar pros and cons which rely on the same concept.   


Fading Trading Strategy 


It is a strategy which implies against the momentum. Therefore traders will buy when the market is selling and sell when the market is buying.


The fundamental idea behind the fade strategy is that it bet on reversal to profit from market corrections. As the market is volatile there are times when traders can benefit from this trading strategy. 


Fibonacci Retracement  


Traders in swing trading know when the stock tends to retrace sometimes at the different levels before reversing again. As the fibonacci retracement lines which helps traders to identify support & resistance levels.  The fibonacci line at different percentage levels like 23.6 percentage and the 61.7 percentage which is potential reversal levels.


Bollinger Bands  


A bollinger band is a price band on both sides of a moving average trend line. It creates a place on both sides of a MA trend line. Trader creates a range between which asset price moves.  For example, suppose a swing trader will take a position after the confirmation candle where a robust bearish candle breaks in the middle BB line, indicating the presence of sellers.  You can place a stop-loss above the breakout candle. The protective SL allows the trader to eliminate the chances of a fake trend reversal signal and the trader can wait for the right time till the time moves back in the middle BB line and closes near it.


MACD Crossover 


The MACD consists of two averages lines which signal traders to buy or sell the following financial assets. In the bullish trend,  the MACD indicator will single line, triggering off a buy signal. And the trend will reverse to bearish when the MACD line falls below the signal line, indicating selling opportunities. As the MACD is one of the popular swing trading techniques. Discover the different types of short-term trading strategies and find the one that's right for you.


State The Advantages & Disadvantages Of Swing Trading Strategies   


Advantages of Swing Trading Strategies 


 Short time trader 


A swing trader can achieve a significant amount of return like a day trader. So because of this trade it takes days to unfold & it doesn't require traders to constantly monitor the following trade. 


Unlike the intraday trader who have to continuously monitor their trade, and seek out opportunities which may or may not provide profits.  Day traders have to undertake lots of hard-work in order to make a successful intraday trade in the stock market.


Avoiding overtrade 


As a result of spending less time at market, the swing traders are less tempted to overtrade and face heavy losses in their trade. Many swing traders often use the stop-loss for safeguarding their investments. 


Less Trading charges 


The commission, fees and taxes for swing is low and the impact of these charges is also quite low for the trader.


Disadvantages Of Swing Trading  Strategies 


A certain event such as pandemic or any financial crisis can harm your trade. A swing trader becomes clueless and the effect of the overnight risk can directly impact their financial portfolio.  As the swing trader you don't get much flexibility to exit your trade because of trading hours & overnight change in the market.


Another drawback of swing strategy is that the swing trading aims to profit from different price swings. As you enter at the beginning of a new swing and get out as soon as the drop or pullback starts. By doing this you can miss out on a great stock which can make a remarkable return over the long run.




A swing trader can use a number of strategies depending upon their experience. A trader can use simple to complex strategies. You can also use the combination of strategies to customize your trade. With the rise in online trading and trading apps the popularity of the swing trade is increasing on a daily basis.


Using Swing trading can help in multiple ways. To become a better trader you need to learn, adapt and implement new techniques each day. And when it comes to stock trading, you can take the benefits of trading by just opening a free demat account from a broker such as Share India in just a few simple steps.


Frequently Asked Questions (FAQs)

There is no perfect strategy which will suit any newbies in the stock market. But as a beginner you should start with strategies which don't involve deep knowledge in technical analysis. You can also try trend trading strategies and learn to recognize popular swing trading indicators.

A high RSI above 70 refers to a sell signal for traders, and it also suggests that the financial asset is overbought and possesses an overvalued risk. And reading of 50 denotes the security has a neutral or balance between the bullish or bearish positions.

Some of the indicators you can use for swing trading is as follows: Moving Average Relative Strength Index (RSI) Volume Stochastic Oscillator
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