Many people confuse the concept of swing trading with intra-day trading. But the fact is that swing table is really different from intra-day trading. Both the techniques help the trader in booking profit in short duration of time. Let us understand the concept of Swing Trading in a better way.
- Swing trading is basically a short term trading method wherein an investor purchases the security such as stocks, futures, options and other derivatives with a goal of booking profit in a time period between two days to two weeks. The aim of this technique is to make profits in short duration of time.
- Swing Traders do not purchase security by analyzing the fundaments of the security. Their aim is not investment rather they aim at short term profits hence they only focus on trends that the security follows.
- The key to making a profit in swing trading is understanding the trends. There are several trends such as Head and shoulders, double top reversals etc. These trends help in understanding the future position of the price.
- Usually, when the market is bullish, a trader may go long on stocks depending on the charts. The key factor here would be that if the market would continue to be bullish only then will the trader go for a long position. Or else if the trader is expecting the market to be bearish in coming days, the trader may go short on the securities and he may square off his position once the market price of the security falls.
- Most of the swing traders do not choose to trade on margin as many stock brokers do not offer margin for such trades. The margin is restricted to intraday trading but the exceptions are always there.
Swing trading can be really beneficial and it can easily help in multiplying the capital with minimum risk.