If they do, what fundamental analysis do they look at?
It really depends. Every type of trader has their strategy.
When I swing trade stocks, the technicals are what get me interested. I have to see a nice setup with favorable risk/reward.
If the technical setup isn't there, I won't place the trade.
I will, however, look at basic fundamentals before entering some of these trades. I don't do in-depth research but I will analyze things like:
- Share structure
- Basic financials (i.e. profitability, P/E, EPS, etc.)
- Upcoming catalysts (i.e. news and earnings)
- Warrants and offerings (for potential dilution)
This approach to fundamental analysis takes less than 10 minutes or so and I find it beneficial when I plan to hold a stock for a few weeks. I may as well know a little bit about the stock I am holding, even if the trade is driven by technicals.
A small amount of fundamental analysis can protect you from surprises. For example, if you find the perfect technical setup and neglect the fact that the company reports earnings soon, you may watch your trade unravel as the company reports subpar earnings.
Swing trading involves holding a long or short position for more than one day up to several weeks. Most will use technical analysis as their guide for entry and exit. It attempts to capture short term price movements, usually in more volatile stocks. Volatility is a trader's best friend.
Swing trading involves several decisions:
Direction of trade (long or short)
Stop loss price
A swing trader might use fundamental analysis for screening stocks to create a trading list but beyond that, fundamentals play little to no part in it. The financials of a company are relevant to investors, not short term traders.
Nope, why should they?
Fundamentals are for investment. Anything TRADERS care are not fundamentals - but CHANGES in fundamentals that are not foreseen.
Example: Microsoft. SOLID company. This is priced in. Their guidance tells you how the next profit looks. As a swing trader your horizon is maybe a month (and that is long) - you think ANYTHING significant will change at Microsoft in a month that is not already visible in news reports - and thus priced in? Nope.
Now, The US president does not like Microsoft and suddenly out of the blue announces microsoft is forbidden to operate and have employeed in the USA (note: TOTALLY unrealistic, but that is not the point here). This is a fundamental change and - and that is important - it is suddenly and out of the blue, so it is NOT in the prices. THAT may interest swing traders. But otherwise - swing traders look at quite low timeframes and fundamentals do generally NOT change in these timeframes.
No, swing traders are motivated by news and trading tools to convince themselves to do so. It is no different than gambling on probabilities
The keyword for a swing trader is to tell a story. Logically, fundamental stories can be part of the storytelling or hindsight.
Note : Be careful not to confuse swing trading with High-frequency trading.