If you are interested in Swing trading, you will learn a lot from this article, especially as it explains how swing trading is one of the strategies to maximize your investment.

You should learn and master Swing Trading so you can easily apply it to the success of your trading plans.

Keep reading to learn the most basic and important details about this type of trading.

It also unveils the best answers to other Swing Trading FAQs or frequently asked questions.

 


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What Is Swing Trading? 

Swing Trading is a form of trading on stock and other financial instruments. Positions are held for longer than a single day.

Stocks like hot penny stocks are traded to give maximum ROI.

Forex, futures, Options, ETFs, and Cryptocurrency are also traded in this short term market speculation.

There are many definitions of Swing Trading.

DayTrading.com states that:

“The straightforward definition of swing trading for beginners is that users seek to capture gains by holding an instrument anywhere from overnight to several weeks.”

Wikipedia defines Swing trading in this way:

“Swing trading is a speculative trading strategy in financial markets where a tradable asset is held for between one and several days in an effort to profit from price changes or ‘swings’.

A swing trading position is typically held longer than a day trading position, but shorter than buy and hold investment strategies that can be held for months or years.”

This trading strategy is suitable for individuals who have the passion to trade medium days or weeks.

Investopedia explains that:

In reality, swing trading sits in the middle of the continuum between day trading to trend trading.

A day trader will hold a stock anywhere from a few seconds to a few hours but never more than a day; a trend trader examines the long-term fundamental trends of a stock or index and may hold the stock for a few weeks or months.

Swing traders hold a particular stock for a period of time, generally a few days to two or three weeks, which is between those extremes, and they will trade the stock on the basis of its intra-week or intra-month oscillations between optimism and pessimism.

Investopedia further reveals that:

Swing trading is based on identifying swings in stocks, commodities, and currencies that take place over a period of days.

Investors.com defines this style of trading:

Swing Trading is a strategy that focuses on taking smaller gains in short term trends and cutting losses quicker.

The gains might be smaller, but done consistently over time they can compound into excellent annual returns.

Swing Trading positions are usually held a few days to a couple of weeks, but can be held longer.

If you want to have easy cash today, then Swing trading may not be the best trading strategy for you.

 

Why People Engage in Swing Trading

There are lots of reasons individuals engage in swing trading. In other words, Swing trading is suitable for a certain group of people.

It is suitable for people who love to trade for more than a day

Most swing traders trade days or weeks. Of course, some traders work at night hours based on the time zone. Some may also do this regularly as a night job.

It is suitable for those who are ready to run on a list of markets and instruments

Yes, this is common knowledge but many people don’t know that.

You can speculate on different trading instruments like stocks, Forex, options, Bitcoin (BTC), and so on

This definitely gives you the room you need for diversification on different trading instructions.

It is suitable for those who have the patience to trade for a long time

If you need some extra money now, like say, in hours or in a day, then this may not be the right option for you. Patience is an important virtue possessed by the most successful swing traders!

It is suitable for those want to maximize short-term profit potential by capturing the bulk of market swings.

It is suitable for those who rely exclusively on technical analysis.

Most swing traders also rely on video conferencing tools like Skype and its alternatives to communicate regularly with their brokers.

 

Other pros or benefits of Swing Trading include:

Expensive investment is not required to engage in Swing Trading

With just one computer you can start off. You can also install simple finance and money saving mobile apps to help you save time, money, and energy managing your resources on the go.

There is no risk of burnout because too much stress is not involved

Incidentally, the trader can walk and exercise to keep fit.

He or she can also get paid some extra money on the side to lose weight, keep fit,  and stay healthy by using some apps or programs to exercise, diet and walk.

You can trade at your own convenience and not full time

Swing traders are patient traders and most have day jobs that occupy their time.

A swing trader doesn’t need to constantly monitor his/her trade

The trader can set up the take profit and stop loss tools to automate the entry and exit levels of trades. This should give you peace of mind so you don’t lose burn your account.

It has the potential for significant profits

This is because the trade position is maintained for a few days and weeks. Short trades or trading in or out of the same financial instruments can result in multiple loss a day.

Also See: Intraday Trading.

 

Swing Trading FAQs

 

What Are the Best Indicators for Swing Trading?

Swing traders utilize many types of indicators. These are tools that help the trader to know the direction of price movement so that he/she can place a trade or withdraw from a position.

Although these tools don’t actually work like money making mobile apps that pay people for doing different things, they can actually help the trader to remain focus on a trading plan and to make the right entry or exit decision.

The main types of indicators that Swing traders use include leading and lagging indicators.

Leading indicators predict where the price is headed.

Lagging indicators reveal the trade conditions when the price is already in motion.

Swing traders combine the best of leading and lagging indicators to give a positive result.

Examples of the best indicators for Swing trading include:

  • Moving Average (MA) – This is a leading indicator.
  • Momentum indicator – This is a leading indicator. It helps to evaluate the speed of price change over time.
  • Relative Strength Index (RSI) – this is a leading indicator. It is a momentum indicator plotted on a separate scale. There’s a single line scaled from 0 to 100 that identifies overbought and oversold conditions in the market.
  • Moving average convergence-divergence (MACD) – This is a lagging indicator.
  • Volume indicator – This is a leading or lagging indicator. Traders use it to tally-up trades and quantify whether bulls or bear are in control.

 

What Are the Strategies Applicable for Swing Trading?

Strategies for this type of trade is dependent on what the individual like or wants.

There are many types of strategies you can adopt for Swing Trading.

However, the choice of a specific strategy should be based on the profit capability of the trade.

Trading strategies that would make money pretty quickly regardless of your level of education, skill-set or even experience should be adopted without delay.

Some general strategies that Swing Traders employ include:

Follow price action and use technical analysis

This strategy helps you follow and monitor the success of your stock or financial instrument trades.

Follow the market trends

You can follow the price movement in a specific direction.

If the market is bullish then consider following the upward price trend.

A bullish market is a buying market where the price movement is upwards on the chart.

If the market is bearish, then consider following the downward price trend.

A bearish market is a selling market where the price movement is downwards on the chart.

Bullish and bearish markets are other names for buying and selling markets. You should be familiar with these terms if you shop offline or online.

You can follow counter-trend in swing trading

Swing traders can follow uptrend when there is downtrend in the price movement. Or, vice versa.

This trading strategy is called “Fading”.

The best way to apply a counter trend include:

  • Look for a trend,
  • Wait for a countertrend,
  • Enter the market after you see the counter-trend has played out

You can apply passive trade management

This is a strategy whereby the swing trader applies the stop loss or target profit tools.

Profit/loss is properly managed in this strategy.

A major advantage of this strategy is that your trade becomes more relaxed because it is controlled or automated.

If the passive trade strategy is applied effectively then you should be earning passive or residual income when you are not actively monitoring the trade.

You can apply the strategy of active monitoring

Here you monitor and manage your chart as the price movement goes up and down.

If you are a Swing trader with lots of time on your hands, then this strategy would be suitable for you.

Monitor Support and Resistance levels

This strategy allows you to employ the breakout and breakdown levels of the price movement.

The breakout strategy allows you to take a position when the market is uptrend.

You then monitor price movement and exit the trade when it falls within a price range associated with the support and resistance level on the break-point.

The breakdown strategy contrasts with the breakout strategy.

You exit the trade when the price hits the price level with the support and resistance level defined.

Always monitor the volatility of the trade

The volatility of trade is unpredictable.

It is important to monitor or consider the volatility of any stock in line with other factors like fundamentals or news.

 

Swing Trading

 

What Is the Best Online Broker for Swing Trading?

The best broker for swing trading should be considered at all times.

You must choose your broker based on certain criteria like:

You should check out if the broker is a full service broker or a discount broker

Full-service brokers give advice on investment.

Discount brokers do not give advice on investment.

You should check out the speed of the platform

You can compare and check out the software application used by different brokers.

Those with reliable and unbroken speed should be chosen.

You should check out the cost of using a broker

You can compare the commissions charged on trades, as well as the charges for Electronic Communications Networks (ECN).

Other fees to check out and compare include the market data fees.

These fees may be charged for access to the data that feeds your software application.

You should choose a reliable broker

A trusted broker is a reliable broker.

You can research the reliability history of a swing trader before doing business with him or her.

A Swing trader with a good history of trust should be embraced with both hands!

The reliability of a swing trader is a stamp of approval like a tested product.

 

What Are Some Good Practices for Swing Traders?

You need to avoid trading against the overall trend of the market

This is because there is a possibility of reversal, and in that case, a counter-trend would become profitable.

You should combine a secondary indicator to confirm a signal with the primary indicator you are using

For instance, a Moving Average or MA indicator can be combined with a support and resistance indicator when you are following trends.

You must have a clear idea of your exit threshold and keep it lower than the profit you are targeting

The use of Target Profit and Stop Loss would help you keep this under control.

Following the above best practices can make you a successful swing trader.

 

Conclusion

The above is a quick Swing Trading Guide.

It also reveals some of the best answers to other swing trading FAQS.

 

swing trading guide