What it is:
Swing trading is a short-term strategy used by traders to buy and sell stocks whose technical indicators suggest an upward or downward trend in the near future -- generally one day to two weeks.
How it works (Example):
Swing trading uses technical analysis to determine whether or not particular stocks will go up or down in the very near term. By examining technical indicators, day traders look for stocks whose price movements have momentum -- signaling the best times to buy or sell. Swing traders are not concerned with the long-term value of a given stock.
Why it Matters:
Though based in sound methodology, swing trading is risky. The successful swing trader is focused only on locking in substantial gains in short spurts of time, making the strategy especially vulnerable to unexpected economic shocks (e.g. oil shortages, high interest rates, etc.).