Strategies

What Swing Trading Is and How It Works

Astron Team · 09/24/2026 · 6 min read

Between day trading, which closes all positions the same day, and long-term investing, which can last years, there's an intermediate space known as swing trading. In this style, trades usually last from a few days to a few weeks, seeking to capture a bigger price move than a day trade, without requiring constant screen watching throughout the day.

This article explains what characterizes swing trading, how to identify good opportunities on this time frame, and the risk management precautions specific to this style.

What sets swing trading apart from other styles

The main criterion is how long the trade stays open. While the day trader closes everything before the session ends, the swing trader holds positions open overnight and, often, over the weekend, seeking to capture moves that develop over several days.

This feature brings a practical advantage: since trades don't need to close on the same day, swing trading requires less screen time than day trading, making it more compatible with those who have other occupations during the day and can only analyze the market at specific times.

How to identify swing trade opportunities

Trend analysis on the daily chart

Swing traders usually work mainly with daily or multi-hour charts, instead of the minute charts used in day trading, seeking to identify trends or patterns that develop over several days.

Combining indicators

It's common to combine moving averages to identify the trend's overall direction with strength indicators, like the RSI, to try to identify better entry points within that trend, avoiding buying right at the top of an already stretched rally.

Risk management specific to swing trading

Since positions stay open overnight, the swing trader is exposed to news and events that happen outside trading hours, which can generate market openings with prices quite different from the previous close (so-called gaps). This risk needs to be factored into the position size, usually with a bit more slack than what would be used in a same-day trade.

An example calculation: with a R$ 20,000 account and a maximum risk of 2% per trade (R$ 400), a swing trade on a R$ 40 stock, with a stop at R$ 37 (a R$ 3 distance), would allow a position of R$ 400 ÷ R$ 3 ≈ 133 shares, totaling R$ 5,320 invested. If the target is R$ 49 (a gain of R$ 9 per share), the potential profit would be 133 x R$ 9 = R$ 1,197, a risk-reward ratio of roughly 1 to 3 on the risk taken.

• Swing trades last from days to weeks, unlike day trading.
• Daily charts and trend indicators are used more in this style.
• Positions stay exposed to news outside trading hours.
• Position size should account for the risk of overnight gaps.

Advantages and limitations of the style

Swing trading's main advantage is allowing you to capture bigger price moves without needing to watch the market all day, making the style more compatible with those who have other activities. The limitation is precisely the risk of unexpected events during the period the position stays open without constant monitoring, something day trading avoids by closing everything daily.

How to start practicing swing trading

Choose liquid assets, with a history of trends that develop over days, define clear entry criteria based on daily charts, and always size the position considering the additional risk of holding the trade open overnight. As with any trading style, a swing trade strategy's past results don't guarantee future results, and losses are part of the process even when the analysis is well done.

Keep a simple record of every swing trade, noting the reason for entry, how long the position stayed open, and the final result. With a few dozen logged trades, it becomes easier to tell whether the style fits your profile and on which types of assets it has worked best in practice.