How Does Swing Trading Work?
Swing trading is adopted by traders who use technical analysis to identify stocks that have a high probability of short-term price momentum. Instead of taking into consideration the fundamental or intrinsic value of a stock, swing traders focus on price trends and patterns. Swing trading is based on the strategy of entering into a trade just when a strong trending stock has come to the end of a consolidation or correction phase. This is because a strong-trending stock usually appreciates quickly after it has completed a correction phase and this presents an attractive opportunity to generate healthy profits. The prerequisites for generating healthy profits in Swing Trading are: • Right stocks: The success of swing trading depends heavily on the selection of stocks. Large-cap and actively-traded stocks, such as Cisco, Apple, Intel and Microsoft, are among the best for this purpose. • Right market: A swing trader is best positioned when markets are moving sideways. Major stocks and index
