A swing trader looks for short-term opportunities in the market to go long at a relative low, or get short at a relative high, with the expectation of closing their position in one to several days. Swing trading involves a longer time horizon than day trading, but avoid holding an open position beyond a week or two.

Swing trading relies upon the natural tendency of the stock market to ebb and flow. Stock prices do not move in straight lines. A stock moving up in price will pause, fall back in price, and then push to new highs. Each time it falls in price, a swing trader is looking for an opportunity to get long when it returns to its prior trend. A similar process is followed for stocks in a downtrend.

Most good swing trading systems incorporate both a bullish and bearish outlook, allowing a trader to diversify their trades for changing market conditions. This helps protect a trading portfolio against losses due to changes in overall market trends.

A prudent swing trader will utilize stop loss orders to prevent any one trade from creating a sizable account loss. More sophisticated trading systems will also establish a pre-defined profit stop.

A profit stop exits the trade once the stock reaches a pre-determined price level. Other traders will hold their position so long as the trend continues, so as to maximize their profits from a sustained rally or market decline. A trailing stop loss, or similar device , is use to close the trade once a counter move occurs.

The concept behind swing trading is simple, but it is not easily implemented. The factor that most separates successful swing traders from those who suffer sustained losses is a strong money management system. Unfortunately, the majority of traders fail to develop or implement this critical aspect of a sound swing trading plan.

Sound money management principles seek to limit losses on trades gone awry, while also considering the profit side of the equation. The profitable trades must produce sufficient gains with sufficient frequency so as to overcome the anticipated losses. If those losses are not contained, they will out pace the profits.

Swing trading can be effectively utilized on a part-time basis, allowing a trader to also have a day job. With the sophisticated conditional orders available through most online brokerages, it is not necessary to agonize over every market tick. A stop loss order will close your trade to limit losses, while a simultaneously placed order will capture the profits from your winning positions. Using a "on cancels other" configuration negates the unexecuted order when the paired transaction is executed.

With a modest investment, most people of average intelligence can quickly master the discipline of swing trading. The reward of doing is so is a more consistent growth of capital than traditional "buy and hold" investing can offer.