What is Swing Trading and how you can make money in the Stock Market
A Swing trading is a trading technique that is used by traders to buy and sell stocks, whose technical indicators gives suggest an upward or downward trend in upcoming days.
It is a short term trading strategy.
To understand the swing trading, first, we need to understand the technical analysis terms that will be used in our swing trading strategy.
The trend is the most important for technical analysis and swing trading. It is the direction of the market and it is very important to identify that current trend of the stock for swing trading. Mainly there are three types of trends.
Uptrend: When the price of the stock is going in an upward direction, we can say that there is an uptrend.
Downtrend: Price moves downwards making lower highs and lower lows, there is a downtrend in the market.
Sideways: When the price bounces in between a specific high and low price. In the sideways, the price makes equal high and low and moves in a specific range.
Importance of Trend Line:
- It takes a minimum of two highs or lows to draw a valid trend line but it takes three to confirm a trend line.
- Like support and resistance levels, trend line becomes stronger the more times they are tested.
- Don’t try to draw a trend line by forcing them to fit the market. If they don’t fit right it means that the trend line is not valid.
2. Support and Resistance concept for Swing Trading
It is one of the most widely used concepts in technical analysis. It is nothing but the demand and supply area.
Support: It is the level at which the demand for the stock is high and buyers are more active to buy the stock.
Resistance: At this level, the supply of the stock is high and sellers are more active to sell the stock.
3. Technical Indicators
Technical Analysis Indicators are nothing but the mathematical formulas that traders use for their trading to decide when to enter into trade.
An indicator like volume is useful for confirm the price movement and the probability that the given move will continue. Indicators can also be useful to buy and sell signals.