Swing trading relates to a style of trading which uses technical analysis as its basis. Unlike day trading, swing traders are happy to run their positions overnight, and can hold for weeks if that is what their preferred technical indicators are telling them to do. In this way, they hope to capture bigger moves than those expected by day traders and this also means that they are generally prepared to take a larger risk in the hope of capturing a bigger percentage return. As with day traders, technical analysis is used to time entry and exit points. However, swing traders usually employ a range of indicators (usually chosen after extensive back-testing and trial and error) which can vary depending on the asset class they are trading. This is not to say that some swing traders don’t also use fundamental analysis, especially initially to assess when a stock, index or currency is under or overvalued. But technical indicators are vital – momentum, MACD, moving averages, Bollinger Bands, candlestick patterns and the Relative Strength Index are amongst the most popular indicators used. Swing Traders tend to have their favourite combinations. The trick is to experiment, but also to understand fully what each indicator is trying to achieve. Also, avoid using any more than two or three indicators per financial instrument or things can become very muddled. Like trend traders, swing traders can run their positions for days or weeks. However, it’s important to note that swing trades can go against an underlying market trend. For instance, it could be that within a trend a technical indicator suggests that a financial instrument is overbought or oversold. This is where a swing trader steps in to take advantage of a counter-trend move. Quite often these can prove to be very profitable. If a market sells off during an uptrend, it may loosen weaker hands and scare investors out of their positions. This can turn mild profit-taking into a more powerful corrective move.