What is Swing Trading?

Definition: Swing trading is a short-term forex strategy that aims to capture investment gains by taking advantages of a security’s price swings, typically over the period of two weeks. This strategy seeks to capitalize on a security’s short-term movements to realize an investment return.

What Does Swing Trading Mean?

What is the definition of swing trading? Swing traders use the indicators of technical analysis to identify price swings and determine whether a stock price will rise or drop in the short run. In doing so, they invest in securities that have momentum and select the best timing to buy or sell.

Furthermore, technical analysis indicators help swing traders to capitalize on a security’s current trend. To analyze a current trend or a trading pattern, swing traders use swing charts, which provide trading data based on statistical analysis. Therefore, swing trading is not concerned about the long-term value of a security. They simply look at the up and downward swings in the stock price. These investors can make large returns on stocks that decline in value over time because they are making returns on each small price swing while the overall trend is downward.

Let’s look at an example.


George is an experienced swing broker. He trades a portfolio of stocks, and he follows their trading pattern using technical analysis. George decides to implement different swing trading strategies on different stocks to take advantage of their price swings:

Momentum trading strategy

One of the stocks that George follows has momentum, i.e. it moves significantly upward on high trading volumes. George thinks that, most likely, the price of this stock will rise in the short-term. Therefore, he decides to enter a trade to follow the upward trend to the point that the stock price stops rising. To realize a profit, George should exit the trade before the stock price starts swinging downwards.

Scalping strategy

A group of stocks that George follows allow him to make several trades a day to realize a small profit. In fact, George seeks to capitalize on the bid-ask spread for each trade. It is a straightforward, simple strategy that swing traders use following the trends and patterns of forex currency pairs.

No matter which strategy George will follow, swing trading is a risky forex strategy. Successful swing traders focus on realizing huge gains in the short-term by following a price trend. However, unexpected economic events such as the rise of the interest rates or an oil shortage may make the strategy break.

Summary Definition

Define Swing Trading: Swing trading is an investment strategy that investors use to make a return on the margins by buying shares as the stock price decreases slightly and selling after it increases slightly.