Anyone who has watched the market for even a limited period of time knows that stock prices and market indices move up and down. However, they almost never move straight up or straight down. Instead, they zigzag back and forth, making short swings across a fairly narrow range within a primary longer-term uptrend or downtrend. Those who engage in "swing trading" recognize this fact, and attempt to capitalize on it. Simply put then, swing trading can be defined as an investment strategy designed to identify and profit from the short-term zigzag price movements that almost always occur within any established market trend. If you can identify the trend and range you can use this knowledge to time market moves and seize profits or cut losses within this range. A versatile technique, swing trading can be used with equal success in both up and down markets-and, when a specific trading range can be determined, it can also be a profitable strategy with stocks or indices that are essentially moving sideways. Swing trading is an opportunistic approach to investing, but swing traders are not contrarians. In fact, the astute swing trader will always take positions in line with the market's primary direction, living by the axiom, "The trend is your friend." As such, a swing trader's arsenal of strategic options can be broken down into three basic categories:
1. When a stock's primary trend is bullish (i.e., moving upward), the swing trader will monitor for a pullback to the long-term support level and then buy shares, playing for a short-term price rebound to (or beyond) the stock's most recent previous high.
2. When a stock's primary trend is bearish (i.e., moving downward), the swing trader will watch for a rally to the longer-term resistance level and then sell shares short, looking for a near-term pullback to (or below) the stock's most recent previous low..
3.When a stock is range-bound (Le., locked in a is range-bound sideways price pattern), the swing trader will either buy on short-term pullbacks to the longer-term support level or sell short on short-term rallies to the longer-term resistance level. Typically, decisions regarding whether to watch for bullish or bearish entry opportunities will be dictated by whether the sideways-moving stock's industry group (or the market as a whole) is tracking in a bullish or bearish pattern.
From Book - Swing Trading Simplified by By Larry D. Spears