Swing trading seeks to exploit the natural flow of the stock market and if carried out in a sound manner, presents potential for increased profitability over and above the traditional avenues for trading.

As a swing trader, your job is to look for short term opportunities in the market, seeking relative lows and highs in price differentials to leverage. The time horizon for swing trading is a bit longer than day trading, though holding open positions for a week or so is often avoided. While the swing trader’s positions are held longer than a day trader’s, they are still considered short term holds relative to the standard buy and hold strategy, often with a several day to several weeks hold on an underlying security.

An effective swing trader appreciates that stock prices do not move in straight line. A stock will gain in price, then later may lose or become remain unchanged, offering potential for a swing trader to capitalize. Price differentials present swing traders with an opportunity to either go long or short in a way that may bring quick returns.

Many sound swing trading systems encompass both bullish and bearish perspectives, allowing a swing trader to diversify their trades in line with the changing market conditions. This may prove instrumental in avoiding losses that may be incurred due to daily market trends.

A reasonably prudent swing trader should employ stop loss orders to forestall sizable account losses with individual trades. Furthermore, in more developed trading systems, pre-defined profit-loss measures may also be leveraged to curb speculative trading and potentially larger trading losses. The profit stop measure may also be done away with once the stock reaches the pre-determined level.

Many swing traders employ the use of charts when selecting their underlying securities. Admittedly charts may not be used to foretell how the market will be in the future, but they describe past trends that a trader can be used to set their trading criteria.

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