Swing trading is a style of investing that consists of holding on to a particular stock for only a short period of time, which is generally no longer than a two week period, and buying that stock on an intra-week or intra-month price basis. Differing from other investors, a swing trader will not concentrate their efforts on researching the company or company fundamentals, instead they will try to move on short-term movement of their chosen stocks or indices in order to cash in on them.

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.

An area where traders involved in short-term trading loose money is capital-gains tax. The present tax structure is highly skewed in favor of long term investors. The tax levied on capital gains upon a realization of profits is much higher if the profits are booked on swing trading stocks.

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.

No particular rules apply to this method of trading stocks. Swing traders will all have their own particular way of conducting transactions. Though there are statistical tools such exponential moving averages, swing trading is often just based on intuition.