Swing Trading

#Definition

Swing trading is a trading style that holds positions for days to weeks, aiming to capture intermediate price movements or "swings" in prediction markets. Swing traders operate between the extremes of news traders (minutes to hours) and position traders (weeks to months), seeking opportunities from event cycles, polling trends, and sentiment shifts.

This approach balances active management with practical time demands, making it accessible to traders who can't monitor markets constantly but want more activity than pure buy-and-hold.

#Why It Matters in Prediction Markets

Swing trading suits prediction market dynamics well:

Event cycle alignment: Prediction markets follow cycles—debates, poll releases, primary elections—that create multi-day opportunities perfectly suited to swing trading timeframes.

Mean reversion exploitation: Short-term overreactions often correct over days. Swing traders can fade extreme moves without the immediacy pressure of day trading.

Practical accessibility: Most participants can't watch markets continuously. Swing trading requires checking markets once or twice daily, fitting into normal schedules.

Information processing time: Complex news requires interpretation. Swing traders allow time for analysis before acting, avoiding the pure speed competition of news trading.

Volatility capture: Prediction markets experience significant price swings around events. Swing trading is positioned to capture these movements without holding through entire election cycles.

#How It Works

#Trading Style Spectrum

#Swing Trading Mechanics

1. Identify swing opportunity: Look for events, polls, or sentiment shifts that will play out over days
2. Entry timing: Enter after initial reaction stabilizes or on anticipated move
3. Hold through the swing: Maintain position as price moves toward target
4. Exit on completion: Close when swing target reached or thesis invalidated
5. Repeat: Move to next opportunity in same or different market

#Types of Swing Opportunities

Event anticipation swings: Price moves in advance of scheduled events (debates, primaries, earnings). Enter before, exit after the event resolves.

Post-event correction swings: Markets overreact to news; mean reversion occurs over days. Enter against the extreme, exit as price normalizes.

#Automating the Search

def identify_swing_points(prices, window=2):
    """
    Identify potential swing lows (buying opportunities) and swing highs (selling points).
    'window' determines how many days on either side must be higher/lower.
    """
    swing_lows = []
    swing_highs = []
    
    for i in range(window, len(prices) - window):
        current = prices[i]
        
        # Check for Local Low (Support)
        if all(current < prices[i-k] for k in range(1, window+1)) and \
           all(current < prices[i+k] for k in range(1, window+1)):
            swing_lows.append((i, current))
            
        # Check for Local High (Resistance)
        if all(current > prices[i-k] for k in range(1, window+1)) and \
           all(current > prices[i+k] for k in range(1, window+1)):
            swing_highs.append((i, current))
            
    return swing_lows, swing_highs

market_data = [0.45, 0.42, 0.38, 0.35, 0.40, 0.48, 0.52, 0.50, 0.49]
lows, highs = identify_swing_points(market_data)
# Result: Low at index 3 ($0.35), High at index 6 ($0.52)

Polling trend swings: Sustained polling movement over weeks creates tradeable trends. Enter with the trend, exit when momentum fades.

Sentiment cycle swings: Narrative shifts (scandal fades, issue gains salience) play out over days. Trade the narrative arc.

#Numerical Example

Scenario: Primary election in 10 days

Day 0: Candidate A at $0.45, Candidate B at$0.40, rest of field at $0.15 Your analysis: Candidate B has momentum; debate in 5 days likely to help them

Swing trade setup:

• Buy Candidate B at $0.40
• Target: $0.55 (post-debate if they perform well)
• Stop: $0.32 (if thesis fails)
• Holding period: 5-8 days

Day 5 (post-debate): Candidate B performs well, price rises to $0.52 **Day 7**: You exit at$0.52

Result: +30% return on position over 7-day swing

#Entry and Exit Strategies

Entry approaches:

• Limit orders at support levels
• Buy on pullbacks within uptrends
• Enter after volatility spike settles
• Scale in across multiple prices

Exit approaches:

• Predetermined profit targets
• Trailing stops as price moves favorably
• Event-based exits (sell after debate regardless of price)
• Technical levels (resistance, round numbers)

#Examples

Debate swing trade: A presidential debate is scheduled for Thursday. Historical patterns show markets often overreact to debate performance, then partially correct by Monday. A swing trader:

• Monitors pre-debate prices on Wednesday
• Watches debate Thursday night
• If clear winner emerges, fades the immediate overreaction Friday morning
• Exits Monday as prices normalize

Polling trend trade: A candidate's polling average improves steadily for two weeks. A swing trader:

• Enters when trend becomes clear (not immediately)
• Holds as polls continue moving favorably
• Watches for trend exhaustion signals
• Exits when momentum stalls, capturing the middle portion of the move

Primary night swing: Super Tuesday involves multiple state primaries. A swing trader:

• Positions ahead of results based on research
• Adjusts as early results arrive
• Holds through the full night's results
• Exits the next morning when prices reflect complete information

Scandal fade trade: A candidate faces a scandal; price drops 20% in one day. A swing trader:

• Waits for initial panic to subside (1-2 days)
• Assesses scandal severity versus market reaction
• If overreaction likely, buys at depressed prices
• Sells over the next week as story fades and prices recover

#Risks and Common Mistakes

Holding through resolution: Swing trades should complete before binary events where you have no edge. Holding a swing trade through an election is position trading with swing trade sizing—likely too risky.

Ignoring transaction costs: Multiple entries and exits accumulate slippage and fees. Ensure swing profits exceed these costs.

Overtrading: The temptation to always have swing trades running leads to forced entries without genuine edge.

Narrative chasing: Trading every news story as a swing opportunity confuses noise with signal. Many events don't create tradeable swings.

Inadequate stop discipline: Swing trades can go wrong. Without stops, a swing trade becomes an unplanned position trade holding through unfavorable developments.

Timeframe drift: Starting as a swing trade but holding through the entire event because you're losing and hoping for recovery. Stick to your original timeframe.

#Practical Tips for Traders

• Plan the trade completely: Before entering, define entry, target, stop, and maximum holding period. Write it down.

• Match position size to timeframe: Swing trades face more volatility than position trades. Size accordingly—you need to survive adverse swings before your thesis plays out.

• Use the event calendar: Map upcoming events (debates, primaries, polls) to identify swing opportunities ahead of time.

• Set alerts, not constant monitoring: Configure price alerts rather than watching continuously. Swing trading shouldn't require constant attention.

• Track swing trade performance separately: Swing trades have different characteristics than position trades. Evaluate them on appropriate metrics.

• Develop a swing playbook: Certain patterns repeat (debate reactions, polling trend trades). Document what works and systematize your approach.

• Accept incomplete capture: You won't catch the exact bottom or top of swings. Capturing the middle 50-70% of a move is success.

• Know when to sit out: Not every week offers good swing opportunities. Patience to wait for setups is essential.

#Related Terms

• Position Trader
• News Trader
• Volatility
• Mean Reversion
• Liquidity
• Expected Value (EV)
• Risk Management

#FAQ

#What is swing trading in simple terms?

Swing trading means holding prediction market positions for days to weeks, not minutes (day trading) or months (position trading). You're trying to catch price "swings"—movements that happen over the course of a debate cycle, polling trend, or news event. It's a middle-ground approach for people who want to actively trade but can't watch markets all day.

#How is swing trading different from position trading?

Swing traders hold for days to weeks and trade event cycles and intermediate movements. Position traders hold for weeks to months based on fundamental probability assessment. Swing traders might trade five times during an election cycle; position traders might hold one position throughout. Swing trading requires more active management but less long-term conviction.

#What makes a good swing trade opportunity?

Good swing opportunities have: (1) a clear catalyst or event creating the swing, (2) enough time to play out (several days minimum), (3) identifiable entry and exit points, (4) sufficient expected price movement to justify trading costs, and (5) a defined thesis that can be proven right or wrong. The best opportunities often come around scheduled events where you can plan ahead.

#How much time does swing trading require?

Swing trading typically requires checking markets 1-2 times daily, plus more attention around key events. You need to monitor open positions, assess whether your thesis remains valid, and execute entries/exits. This is more than position trading (weekly review might suffice) but far less than day trading (constant monitoring).

#Can I combine swing trading with other styles?

Yes, many traders use multiple styles simultaneously. You might hold a core position trade based on fundamental conviction while taking swing trades around events within that same market. The key is keeping clear accounting of which trade is which, with appropriate sizing and exit discipline for each.