How to Swing Trade Stocks: Examples & Tips

Swing traders use technical analysis, which is the study of statistical trends and patterns on a stock chart, to spot trading opportunities. It’s for this very reason that trading can be as intimidating as it is risky. While there are many swing trading strategies available out there to swing trade, some tend to work out better over the longer term. This will be different for everyone involved as your psychology comes into play. For all of the strategies should be used with a proper money management scheme. Swing trading is less risky than other forms of short-term trading.

A support level indicates a price level or area on the chart below the current market price where buying is strong enough to overcome selling pressure. As a result, a decline in price is halted and price turns back up again. A stock swing trader would look to enter a buy trade on the bounce off the support line, placing a stop loss below the support line. There are numerous strategies you can use to swing-trade stocks.

swing trading strategies

Our team at Trading Strategy Guides has already written about other Tokenexus opinion based on objective data that work. Read the Harmonic Pattern Trading Strategy – Easy Step By Step Guide or the MACD Trend Following Strategy- Simple to Learn Trading Strategy. These are some of the most popular strategies ever posted at Trading Strategy Guides. You will most likely see trades go against you during the holding time since there can be many fluctuations in the price during the shorter time frames. Because trades last much longer than one day, larger stop losses are required to weather volatility, and a forex trader must adapt that to their money management plan. Swing trading refers to the medium-term trading style that is used by forex traders who try to profit from price swings.

Forex trading costs

The intraday volatility is the highest if the gap is caused by major earnings or company news. Day traders’ shorter time frame means they don’t generally hold positions overnight. As a result, they avoid the risk of gaps from news announcements coming in after hours and causing a big move against them. Meanwhile, swing traders have to be wary that a stock could open significantly different from how it closed the day before. Each swing trader creates a strategy that balances their risk tolerance and the potential reward, along with the amount of time, effort, and commissions involved.

  • Swing traders are exposed to gap risk, where a security’s price changes while the market is closed.
  • That’s why today, we’re going to cover swing trading for beginners.
  • The perfect trade would be buying at the bottom channel line and selling at the top channel line, which would be a 100% performance.
  • How to Swing Trade by Andrew Aziz and Brian Pezim is arguably the most popular book about swing trading ever written.
  • This guide covers an example that illustrates how to swing trade stocks using a Fibonacci retracement and helps you to identify your swing trading entry and exit points.

On the other hand, a bearish crossover occurs when the price of a security falls below these EMAs. This signals a potential reversal of a trend, and it can be used to time an exit of a long position. When the nine-period EMA crosses below the 13-period EMA, it signals a short entry or an exit of a long position. However, the 13-period EMA has to below the 50-period EMA or cross below it. When markets are volatile in both directions, the best swing trades are to be had.

While some swing traders pay attention to fundamental indicators as well, they are not needed for our simple strategies. Swing traders can use a wide array of technical indicators. What makes swing trading unique is that it blends several components of day trading, with the speed of position trading. Swing trading indicators are primarily used to find trends that play out between 3 and 15 trading periods. After we analyze these periods, we will be able to determine whether instances of resistance or support have occurred. The opening price will reflect the shock of any unexpected news.

Trend pullbacks, while probably being the most accessible type of pattern to trade and having the best odds of continuation, aren’t the most exciting trades. They’re typically retracements of the recent swing high. Swing traders also pay fewer commissions, fees, and slippage, and these fees have a smaller impact on their trades because their profits are larger per trade. Max Schulz is a professional futures and commodities trader.

Simple Swing Trading Strategy FAQ

Once you have undertaken your research, decide which asset and time frame you wish to swing trade. Also, determine your entry and exit strategy based off your swing trading signal. For example, to buy AAPL when the price hits the support level. We’ve summarised five swing trade strategies below that you can use to identify trading opportunities and manage your trades from start to finish. Apply these swing trading techniques to the stocks you’re most interested in to look for possible trade entry points. You can also use tools such as CMC Markets’ pattern recognition scanner to help you identify stocks that are showing potential technical trading signals.

You’ll trust yourself and your investing strategy more, and thus, get more aggressive and take bigger swings. Using technical analysis to make predictions and time the market effectively will make or break your success with swing trading. That’s why today, we’re going to cover swing trading for beginners. In this short guide, you’ll learn how to do swing trading. But first, we have to explain what swing trading is and the overall strategy behind this approach to investing. Whether you’re a bull or a bear , you can utilize swing trading as part of your investment strategy.

Support and resistance triggers

When volatility is strictly in one direction , it is often more difficult to pull of trades. Swing trading often results in short to medium hold periods. Profit per transaction is higher than day trading but lower than TradeAllCrypto: Crypto Broker Review trend trading. Swing traders can achieve reasonably similar returns to day traders in less time. Because their trades take days to unfold, they aren’t required to sit at their screens, watching each tick go by.

swing trading strategies

The last benefit of using a simple swing trading strategy is that you won’t need to be glued to the screen for the whole day like with day trading strategies. A swing trading plan will work in all markets starting from stocks, commodities, Forex currencies, and much more. The gap and go strategy is typically a day trading strategy where day traders trade stocks gapping up or down significantly on high relative volume.

The Right Stocks for Swing Trading

Good because we’ll be applying this concept to the remaining swing trading strategies. As a swing trader, you’re only looking for “one move” in the market. The swing trading strategies I’m about to share with you have “interesting” names attached to it. If you are undecided whether swing trading or another trading style is best for you, consider reading the comparisons day trading vs swing trading and scalping vs swing trading. Being at the 50% retracement, measured from the swing low to the swing high, a bullish candlestick can move the needle.

Unlike day trading, where trading is extremely fast-paced, swing trading is slower. This strategy is a great way to understand market movements and dip your toe into technical analysis. This technique is useful for swing trading strategies like Catch the Wave because the moving average tends to act as a dynamic Support & Resistance in trending markets. In addition, swing trading relies on technical analysis. Without a proper skillset, more beginning investors may have their trades go unsuccessful.

Each type of trading has its advantages and disadvantages. Swing trading refers to the practice of trying to profit from market swings of a minimum of 1 day and as long as several weeks. The downside of swing Top 5 best candlestick patterns you should know trading is that you must work hard all the time to manage trades, which means you might miss out on potential profits due to market moves. Day traders are the sprinters of the active trading world.

Based on this indicator, they can find market reversal opportunities. The Fibonacci retracement levels of 61.8%, 38.2%, and 23.6% are believed to reveal possible reversal levels. A trader might enter a buy trade when the price is in a downward trend and seems to find support at the 61.8% retracement level from its previous high. There are several swing strategies you need to use in high volatile markets.

Now, may I ask your opinion about the trading idea that I’m developing, specifically on Trailing Stop Loss technique. I rely on the idea that stop loss would depend on the volatility of the price movement. So I use Bollinger Band with 10MA period but at 1.65 outer band settings. I disregard the mid & upper band and use the Lower Band as my Trailing Stop Loss.

An overbought signal may be a signal to exit the trade. We’ll tell you what that stock is really worth, how safe it is, and whether you should buy, sell, or hold it. You’ll also gain detailed breakdowns of the stock – explaining how we arrived at our recommendation. Like we said – trading with VectorVest will transform the strategies you use. With fading during an uptrend, you could take a bearish position near the swing high because you expect the security to retreat and go back down.

Get actionable tips and updates on swing trading every week in IBD’s Swing Trading column. Smaller gains can only produce growth in your portfolio if losses are kept small. Rather than the normal 7% to 8% stop loss, take losses quicker at a maximum of 3% to 4%. This will keep you at a 3-to-1 profit-to-loss ratio, a sound portfolio management rule for success.

My team and I strive to educate you on many different trading styles so that you can diversify and remain nimble in the market. Another benefit of the shorter time frame is that it allows traders to focus on the trade entry and exit. Position “traders” are actually more like position holders. With swing trading, you might hold a stock for a few days to a few weeks or even several months.