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Trading strategies

Swing trading

Definition

Swing trading means holding a position for several days to a few weeks to catch one larger move, usually planned on daily and 4-hour charts. Because positions stay open overnight, swing traders accept gap risk from news and earnings.

Example

Say you buy 200 shares at $48 on a daily-chart setup, with a stop at $45 and a plan to hold for two or three weeks. Your planned risk is $600, but if the company reports weak earnings one evening and the stock opens at $42, the stop fills near $42 and the loss is about $1,200. That gap risk comes with holding overnight.

Hypothetical numbers, for illustration only.

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