What is a Swing Trader?

What is a Swing Trader?

The is a Guest Post by Skylar Hammond is a writer for True Trader

What is Swing Trading?

You’ve watched the movies. You’ve read the books from the money gurus who purport that the only way to have real wealth is by “playing the stock market.” Now, you’re ready to dip your toes in the world of stocks, trading, and investing.

However, shortly after jumping into the stock market waters, you realize that everything is much more complicated than it seems. There are seemingly limitless terms, practices, and apps, and many people stop before they ever get started. 

There’s no denying that there’s a lot to learn. To be successful, you have to understand a little about it all to figure out where you fit in the trading world. The best way to do that is to take it piece-by-piece and expand your knowledge from there. 

There are four primary types of trading:

  • Scalping 
  • Day Trading
  • Swing Trading
  • Position Trading
  • Trend Trading 

Scalping and day trading stocks are short-term, quick, and aggressive forms of trading. Position trading is a long-term, strategic, and patient type of trading. Swing trading falls somewhere in between, so it’s a fantastic entry strategy for learning the intricacies of the stock market. 

Let’s talk about what swing trading is and how it works.

Swing Trading: The Basics 

By definition, swing trading is the practice of holding stocks for a period of time and trading the stock to capitalize on market swings. Does that sound like a whole lot of stock market mumbo jumbo? Keep reading. 

Swing traders tend to hold positions for anywhere from one or two days to a few weeks. Compare that to day traders who open and close numerous positions each day. Position traders, on the other hand, tend to hold positions for months or even years. 

The advantage to swing trading is that you have plenty of opportunities to trade, but because it’s not as long-term as position trading, the risk per trade is much lower. Additionally, because you do hold on to positions until the market swings, your profit opportunity is much higher than with standard day trading. 

In a lot of ways, you get the instant gratification that you get with day trading, with a bit more profitability. However, swing trading isn’t all positive. 

There are some downsides. Because you don’t trade as aggressively as day traders, you might miss significant quick one day moves. Additionally, because you’ll still be trading at frequent intervals, you’ll likely to pay higher commission fees if you are not with a $0 commision per trade broker.  

The Types of Stocks and The Right Market 

In swing trading, it’s crucial to pick the right stocks. Easier said than done, right? Standard advice says that you want to find large-cap stocks. These are companies with a value of more than ten billion (Think Apple, Microsoft, Amazon, etc.). 

You want to choose these large-cap stocks because they tend to have healthy fluctuation without too much volatility. This is ideal for swing trading. You aren’t looking to make major profits with trades. You’re aiming for incremental increases. When the market is active, large-cap stocks will swing between low and high extremes, and your goal is to identify where in those swings to buy and sell. 

Additionally, you want to do swing trading when the market is steady. Bear markets and bull markets are better for position trading and more long-term investments; however, they aren’t the best market conditions for swing trading. 

In a bull market, stocks and prices are consistently trending upwards. In a bear market, prices are steadily falling. Swing trading relies on minor fluctuations, but when the entire market is trending strongly with few pull backs in one direction for several months at a time, there isn’t a lot of potential to earn as a swing trader. 

However, all of these are just general rules. Often, swing traders develop their own strategy and fare well in unlikely market conditions. 

Is Swing Trading Right for Me?

Swing trading is a fantastic introductory style of trading. You have a unique opportunity to see the market and gain experience without the risk of the same severity of losses that you see with other trade types. 

Also, unlike day trading, you don’t have to do it full-time to see movement. You can still work your regular job and invest reasonable hours to get a return. 

However, like any trading, “playing the stock market” is a risky business. Even the best traders make mistakes and experience losses. Most experts recommend never risking more than 2% of your total account on a single trade. 

As long as you’re cautious and don’t trade with money you can’t afford to lose, swing trading could be an excellent option for you. 

A swing trader uses a trading method that attempts to capture profits in a market over a period of a few days to several weeks. The goal of a swing trader is to capture a large part of a potential move in price. There are many different types of swing trading signals, buying the dip into oversold levels, buying the momentum of a swing back to the upside, or buying the dip into a key moving average support. A swing trader just wants to catch a move in one direction over a short time period. They leave the intra-day moves to the day trader and the long term moves to trend traders and investors. 


Skylar Hammond is a writer for True Trader who specializes in topics such as stock trading, personal finance, and forex. He focuses on helping beginners and experts alike learn more about the market and improve their trading skills.

What is a Swing Trader?