All about swing trading

Any trade beyond one day to six months is swing trade. It implies that the stocks are taken for delivery.

For pursuing swing trade, fundamental analysis is not required. If the market does not react to some kind of news, then technical indicators may be helpful for swing trade. Technical indicators work better in swing trade than intraday. In 90 per cent of the cases patterns work in swing trade.

In swing trade, we know entry and exit points so a trader will know his loss well in advance. For delivery stocks, leverage is not allowed so a trader can stick to principles of money management.

This enables a trader to trade subject to the availability of his capital. Usually the returns could be higher than expected and sometimes returns are higher than intraday.

Persons who are studying or working also can take up swing trade because one need not constantly watch the market as it is not intraday. It can be done peacefully as we are not under pressure of limited trading hours.

In swing trade, your profit is high because we extend our stop loss and target so we get better returns. We can identify trades based on patterns like Head and Shoulder, cup and saucer etc.

Having seen the positive side of swing trade, let us get to see the negative side of swing trade. Patience is always a virtue and it is a prerequisite for swing trading. Because we need to study the technical charts and then identify stocks based on patterns.

We have to wait patiently for the right entry points. We still need to watch market everyday if not every hour because we have to observe the price action. We need to constantly see whether the price is moving according to our expectations and we need to exit at the right time.

In order to gain in swing trading, we need to book a profit or loss at the right time. If you don't book a loss and cling onto this stock, hoping it will increase then you are bound to lose your capital also. If the price is not moving in our favour, we need to exit.

In swing trade, capital requirement is high when compared with intraday as stocks are taken for delivery. The best part of swing trade is that it can be taken up by working professionals, students, job holders also.

So, it allows you to work on your own job or business and it enables to generate a certain amount of second income simultaneously.

(The author is a homemaker who dabbles in stock market investments in free time)