Swing Trading Pros and Cons

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Every form of trading has its benefits and problems. Before we discuss the swing trading pros and cons, we need to understand what exactly this form of trading is.

This will help you in figuring out each aspect covered in this review objectively.

So, what exactly is swing trading?

In simple words, swing trading is a good way to earn decent returns in a short period of time. Swing trading setup uses the market swings coming at stock prices to enter and exit out of positions earning profits in the process.

This form of trading is different from intraday trading or delivery trading is!

It looks easy but understanding the different concepts and practicing them takes time and patience. Like everything, swing trading pros and cons also need to be understood.

No free passes here! Right?

Let us discuss them one by one.

Swing Trading Pros

In the pursuit to understand swing trading pros and cons, we will start with the pros of swing trading first:

  1. This form of trading provides good returns of around 5% – 10% which can be earned in the short or medium term. This return is pretty good for such a short period of time and way better than other conventional methods of investing.
  2. The second thing that it does not need you to be constantly tied to your computer like intraday trading. You can do swing trading even with a full-time job but in intraday trading, it becomes impossible to focus on anything else other than the stock market.
  3. Unlike intraday trading, you do not need to spend a lot of time searching for the right trades to earn profits. Once a trade is initiated, you are in for some days or weeks with it. The holding period, in this case, is relatively longer. Thus know about the difference between Swing Trading vs Day Trading and make your decision about investment.

Swing Trading Cons

Furthermore, in order to learn about swing trading pros and cons, now we will shift our focus towards the problems of swing trading.

  1. The first one is that you would be required to spend a lot of time in understanding the concepts of technical analysis of stocks which include reading technical charts, technical indicators, and how to use them effectively in order to earn profits from swing trading.

    If these concepts are not implemented correctly, the chances of trades going wrong increase by many folds.
  2. The second con is that there is a risk factor involved with swing trading. No matter how much knowledge you have and how much experience you have gained, there will be some trades where you might have to suffer losses. There is a good way to decrease the risk factor involved with swing trading. One way is to invest your time in gaining all the knowledge about swing trading and the other one is to always have a pre-defined stop-loss even before initiating a trade. Stop loss protects you from huge losses occurring in a very short span of time.
  3. In swing trading, vulnerability to gap ups and gap downs is there. If your trade is in opposite direction and the stock or index opens with a gap up or gap down, it could lead to heavy losses, and even stop losses are not able to protect in such cases.

If you want to learn more details about technical analysis and technical indicators as well as oscillators, you can refer some of the best swing trading books or can take online course on this field to become an expert in it. There is a reliable source that can help you do that.

Stock Pathshala is a stock market education app that provides a lot of stock market courses and very useful content on investing and trading for different levels of knowledge like for beginners, intermediate level as well as expert level. You should try it once.

In case you are looking to get started with your stock market investments or start swing trading for that matter, let us assist you in taking the next steps ahead.

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