What is swing trading?

Swing trading is a trading style that focuses on trying to capture a portion of a larger move. Swing traders will focus on taking smaller but more frequent gains and cutting losses as quickly as possible.

This style of trading is based on the assumption that market prices rarely move in a straight line and that traders can find opportunity in the minor oscillations. Swing traders focus on the points where a market changes direction, entering and exiting their trades at these "swings". Swing trading is about trading short-term legs of longer-term trends.

Swing trading involves identifying profitable times to enter trades based on two different types of swing: "swing lows" and "swing highs". A "swing low" is a term used to refer to a major price low, while a "swing high" is a term used to highlight a major price high.

A swing trader is concerned with trying to capture the price movements between these major lows and highs. In an uptrend, a trader would be looking to buy, or "go long", from these lows and close the trade at the swing highs. In a downtrend, traders would be looking to sell, or "go short", from the highs to the lows.

It is impossible to consistently pinpoint the exact high and low of every swing move, but the idea is to capture as much of the price movement as possible. In fact, it’s common to miss the exact highs and lows, as it can take time to confirm that a new swing is underway.