Swing trading is sometimes known as ‘momentum trading’ because it takes advantage of price uptrend or downtrends. Swing trading is not high speed day trading which seeks to exploit minor price fluctuations each day. Instead it seeks to capitalize on medium-term breakouts after a period of consolidation or correction is complete.
Swing trading (also known as momentum trading) exploits price uptrend or downtrends by getting in the market during brief counter-trend pullbacks to ride the trend’s momentum. Swing trades can be held for only hours, but more often days and weeks until a trend is played out.
Day trading instead uses minor price fluctuations each day. So you might think that the main difference between day trading and swing trading is the time frame, right?
After all, swing trading seems like a longer-term form of day trading. They share many of the same principles such as.
Going long or short in the market as needed.
Quickly freeing up your capital for the next trade.
Picking more losers than winners to ensure a profitable strategy, and so forth.
That’s correct except there’s one very big difference:
Some of the best day trading opportunities comes from counter-trend trading whereas swing trading must always go with the trend. Does this surprise you? I hope not, because this is how I get my day trades closed out so quickly on most days.
I examine the overnight trend in the market.
Assign specific criteria for keeping in mind that when that trend should be exhausted
Jump at turning points for a quick profit.
Since most of these pullbacks occur before lunchtime here in India, I normally had done my day trading by that time and therefore free for the remainder day.
Of course, I look at the bigger, longer-term picture and take the opposite view (trend vs. counter-trend) for when I get in and exit profitable swing trades with the same 75 % accuracy. But my swing trades are fewer and farther than my day trades and normally last for several days (sometimes as long as three or four weeks). Together the two methods synchronize very well to produce a powerful winning trading strategy.
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