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Swing trading is a type of trading where investors only hold stock for short durations. The time involved is usually no more than a fortnight, and investors will sell the stock based on intra-week or intra-month prices. Swing traders don't spend too much time researching companies or looking at their fundamentals. Instead, the swing trader attempts to realise profit through the short-term variation of particular stocks or indices, rather than through conducting in-depth market analysis.

Large-cap stocks, usually belonging to Fortune 500 firms, are a favorite choice for swing traders. These firms have a track record of making money, and have been around for a long time. These large-cap stocks have a tendency to rise or fall based on market sentiment. Swing traders attempt to take advantage of changes in market sentiment by holding onto stocks for a short duration, usually no more than a few weeks, while the market is in either an optimistic or pessimistic period. They will then rapidly do an about-face.

Any investment in stocks can yield a profit either in the form of capital appreciation or dividend income. People who set out for swing trading tend to have made up their mind to sacrifice possible dividend income in lieu of short term profits that swing trading begets them. This is a choice, they have consciously made and it doesn't necessarily mean that profits made through swing trading can't be higher than the profits made through long term investment.

One sector where traders who are involved in short-term trading are likely to lose money is capital-gains tax. At present, the tax systems favors long term investors. If profits are booked on swing trading stocks, the tax calculated on the capital gains on realization of profits is significantly higher.

However, swing trading turns out to be a good trading style for novice investors. The reason being that, these investors hardly have the expertise to analyze long term trends and are often impatient to book profits. This style of trading offers them profits made in shorter durations even if the profits could have been meatier had they held to the stock for longer periods and done trend analysis.

This style of trading stocks doesn't follow fixed guidelines. No two swing traders are ever alike in the way their form their judgments or make their decisions. Some swing traders also use statistical analysis. These analysis techniques include the use of exponential moving averages. That said, swing trading still relies heavily on hunches.