July 21, 2021

Swing Trading: Strategies, Tips, and Best Practices

Moreover, since the 25 and 50 EMAs are frequently used by swing traders, they are also the most likely to be useful indicators of support and resistance. Some of the most common swing trading strategies include breakout strategies, support and resistance approaches and momentum systems. Check out blog posts and online guides to work out which works best for you, whether you are purchasing gold or hedging crude oil investments. Can use a 5-minute and/or 15-minute chart time frames to find an entry. Ideally, want to try and get an entry on the 3 minute to get another time frame’s worth of information to add to the other charts to create a game plan.

  • Cutting such trade and incurring a big loss is not optimal by any means, but is sometimes required to keep the portfolio risk at an acceptable level.
  • In day trading, you move in and out of a trade within the same day.
  • Now, since the market is not priced correctly all the time, we are bound to get swings in one direction that go too far, and they are then corrected by swings in the opposite correction.
  • Therefore, you determine your trading position once the asset prices break a critical resistance level.

The goal of swing trading is to make a living instead of making a killing on one trade. We believe the best swing traders have quantified their strategies (they are algo traders). They use mechanical trading strategies that are both backtested and tested out-of-sample. Swing trading can be a favorable choice for novice forex brokers reviews and ratings traders due to its lower time commitment, reduced stress, and accessibility. It allows beginners to learn at a comfortable pace, manage risk effectively, and fit trading into their daily routine. While no trading method is without risk, swing trading offers a balanced approach for those starting in stock trading.

Swing trading strategy no. 7: XLP mean reversion strategy

They analyze asset charts to identify trading opportunities, place stop loss and assess when to exit a trading session with profit. For instance, if a swing trader is risking $5 per share on an asset that can potentially produce $15 in profit, the trade has a favorable risk-reward ratio. Conversely, risking $5 to make $4 is not a favorable swing trading decision because of its unfavorable risk-reward ratio.

  • 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.
  • Remember that stop-loss levels should be determined objectively and should not be moved arbitrarily once the trade is active.
  • Its banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides deposit and lending services and products.

It is a trading approach whereby traders try to make short and medium price change gains over a few days to weeks. However, the holding period for swing trades does not go beyond a couple of weeks or months. As a result, a swing trade can last up to a few days or Traders use various trading strategies in order to be successful. When Swing Trading, how long traders hold their trade(s) is a key consideration.


But the best way to learn the top trading setups is to learn them directly from a firm like ours. Because we have 50+ professional traders and we’ve been profiting consistently from the markets for many years, through all kinds of market conditions. Our traders are the real deal, and the strategies they trade have stood the test of time. So head over to TradingWorkshop.com to claim your free spot on our in-depth workshop.

Understanding Swing Trading

For example, if you risk $50 on each trade, you calculate the number of traded shares with $50 divided by the distance between the hypothetical entry price and stop loss level. An often used stop loss level for such swing trades is the low of the candle the day before the gap up happened. Swing trading can be a consistently profitable side hustle, and can even lead to a full-time career.

This type of trading involves searching for a price that will temporarily reverse in a larger pattern. Stock prices temporarily retrace to a previous price point before continuing to drift in a similar direction later. These reversals are difficult to predict and tell except for short-term pullbacks.

Breakout strategy

The gap and go trading strategy work because as stock prices increase, swing traders tend to develop a sense of fear of missing opportunities. Some of the best stocks for swing trading have high trading volume. For swing traders, constant price fluctuations — even small ones — can be beneficial. Day trading involves executing trades thinkmarkets broker review within the same trading day, with positions typically closed before the market closes. Day traders focus on short-term price movements and intraday trends to profit from volatility. Traders adeptly navigated the stock’s rally, its subsequent sell-off, and the news-driven fluctuations influenced by vaccine-related developments.

Best Swing Trading Strategies

Moving average lines play the role of showing key support and resistance areas. Pyramiding is a reference to adding more and more positions in a particular direction. Swing traders are looking to take advantage of big moves, so it makes no sense to take your profits right away if you can avoid that. You will see variations of this with engulfing candles, shooting stars, Doji candlesticks, and many other patterns. However, they all start with that Fibonacci retracement level. Swing trading can be a great way to generate income, but it is not a get-rich-quick scheme.

As we’ve already discussed, one of the great things about all these trading strategies is that we get time to make these decisions. In the example below, we see a sharp pullback in the handle, which ends with a doji at around the halfway level of the cup. This swing low area offers an entry point prior to a multi-day up trend. In the axitrader review ideal pattern, the two swing highs will be at the same price level, but in practice, they will more often form at similar but slightly different prices. There are always pullbacks (swings) within trends that offer attractive entry opportunities. We’ll look to candlestick patterns to confirm that a new swing high or low is forming.

Traders all over the world use Fibonacci retracement tools to find a level to get involved in the market. The three most common levels are the 38.2%, 50%, and the 61.8% retracements. The back-adjusted price per share from 1987 is at about $0.25, and each of your shares would be worth over $150 today. Stock splits are almost ever a booster for stocks of successful companies.

The daily chart is a great time frame for swing trading, less than a few weeks. Weekly charts are good time frames for trading weeks to months out. Finally, monthly charts are good for holding for several months.

However, the positive news may entirely change the company’s outlook, and swing traders may stop buying stocks. Eventually, individual swing traders devise a strategy and plan that offers them an advantage over other traders. This may involve searching for trading setups that result in potentially predictable shifts in asset prices. A swing trading strategy is a pattern you’ve recognized in an asset that could potentially trade in the same direction for multiple days or weeks. For instance, when Tesla surpassed $180, swing traders entered long positions, expecting the rally to continue.


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