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Swing Trading Strategies

Swing Trading

Swing trading is a technique of trading with an objective of generating profit from price changes or swings of a stock within one or several days. Swing traders are not usually concerned in the built-in value of the shares, rather they focus on the price trends of the shares that are determined by technical analysis of stock market charts, which help them identify the stocks that have some price momentum going on.

Swing trading being similar to day trading is a speculative based trading that relies heavily on the market trend and technical analysis for a successful trading.

The basic swing trading techniques

The basic swing trading techniques are as follows:

  • Bullish trading
  • Bearish trading
  • Fading trading
  • Algorithm trading

Bullish trading

Bullish trading utilizes the uptrend of the market. Stocks usually move in a zigzag pattern.

When many zigzag patterns are strung together the chart appears to be moving higher with some degree of predictability. This is the uptrend of a stock.

Traders concentrate on the initial movement upward as the major part of the trend followed by a counter trend.

Traders enter the swing trade when the stock restarts the original uptrend and exit the market when they find the profit target.

Bearish trading

Bearish trading utilizes the downtrend of the market. The zigzag movement of the stocks in the downtrend also has the same high and low rules like bullish trading and the same rules can be followed to make gains in the downtrend.

Fading trading

Fading trading is the technique of trading against the trend. It is also known as counter trading.

Traders enter the market when the share swings are lower and make the exit before the counter trend ends and the stock recommence the main trend again.

Algorithm trading

Algorithm trading is using complex algorithm and formulas by a high-speed computer. It is usually done by investment banks, mutual funds, pension funds and other investor-driven buy-side institutional traders as it is useful in dividing large trades into numerous smaller trades allowing them to manage market risks and its impact.