Swing trading is a basic type of short-term market speculation where positions are held for longer than one day. It can be used to trade in forex, futures, stocks, options, ETFs and cryptocurrencies.

This page will take an in-depth look at the meaning of swing trading, as well as some top strategy techniques and tips. The benefits and dangers of swing trading will also be examined, along with indicators and daily charts, before wrapping up with some key carrier points.

What is Swing Trading?

The straightforward definition of swing trading for beginners is that the user seeks to capture profits by holding the instrument anywhere from overnight to several weeks.

As the training guide highlights, the goal is to take advantage of higher price swings than is possible in the intraday timeframe. But since you are following a larger price range and swing, you need calculated positions so that you can reduce the downside risk.

To do this, individuals call upon technical analysis to identify instruments with short-term price momentum. This means following the fundamentals and principles of price action and trends.

The setup and methods of swing trading are usually done by individuals rather than large institutions. This is because large enterprises usually trade in too large a size to enter and exit securities quickly. However, as the example will show, individual traders can take advantage of short-term price fluctuations.

Benefits of Swing Trading

As forums and blogs will quickly point out, there are several advantages to swing trading, including:

    • Application – Swing trading can be effective in a long list of markets and instruments. For example, you can speculate on the latest altcoins, such as bitcoin (BTC), ethereum (ETH) and litecoin (LTC). Alternatively, you can stick to swing trading with standard options.
    • Resources – There are many resources online to help you become one of the success stories. You have Ebooks, video training courses, PDFs, apps, tutorial classes and various websites. All can provide ideas for forex strategies, general trading plans and top tips for identifying patterns. In addition, join the Discord chat to participate in active swing trading groups.
    • Tools – You can swing trade using candlesticks and other techniques on a number of platforms, from Robinhood to MetaTrader. There are also options to use automated bots and expert advisor (EA) software. Used correctly, this can allow you to run more swing trades than you could manually.
    • Mindset – As success stories show, if you have the necessary traits for effective day trading, you probably have what it takes to swing trade. For example, are you patient? Do you mind having a big stop loss? Are you happy to take fewer trades while being thorough with some of the setups you make? If so, you may already have the qualities and discipline of a successful swing trader.

 

 

Risk

Before you quit your job and start trading for a living, there are certain downsides, including:

      • Market risk – Rule 101 – you can definitely lose money. Although some have made it look easy, any mistake will be felt where it hurts the most, your income. And unfortunately, as is the nature of market speculation, lessons are often only learned the hard way. In addition, margin trading and the use of leverage can see you lose more than your initial investment.
      • Timing – Swing trading is not one of those types of trades where you can enter your position and just overnight a week or so. It is a live trade and a strategy that requires consistent monitoring. This means that juggling swing trade with a full-time job can be challenging.
      • Taxes – Swing trading does not necessarily exempt you from taxes. In fact, in the United States, for example, you may be caught up in pattern day trader laws. So check you can meet any obligations in your financial system first.
      • Risk Management – ​​Whether you’re interested in penny stocks or using algorithmic services, failure to implement an effective risk and money management strategy can cost you dearly. As successful trader Harry Lite says, “Throughout my financial career, I continue to see examples of others I know being ruined by failure to respect risk. If you don’t take risks, it will take you. “
      • Psychology – Do you like a dynamic and fast-paced trading environment? Are you impatient with the need to know whether you are right or wrong? If so, you may not have the mindset needed to become a millionaire and swing trading master.

This is not a set method for swing trading. However, you can use the above as a checklist to see if your dream of millions already seems limited.

Day Trading vs Swing Trading

The main difference is the holding time of the position. Day trading, as the name suggests means to close a position before the end of the market day. However, as chart patterns will show when you pedal your trade you risk an overnight gap appearing or falling against your position.

As a result, when trading swings, you often take smaller position sizes than if you were day trading, because intraday traders often use leverage to take larger position sizes. After that, swing traders can take advantage of up to 50% margin overnight.

But as classes and advice from veteran traders will show, swing trading on margin can be seriously risky, especially if margin calls occur. Therefore swing trading or day trading is not much about what you want to trade, whether it is a commodity, such as oil or oil stocks from Cac 40. Rather, it is only time.

Therefore, day traders will look at 4-hour charts and daily, swing traders will be more concerned with multi-day charts and candlestick patterns. In fact, some of the most popular include:

      • Stepping average cross
      • Head and shoulders pattern
      • Cup and handle pattern
      • Bottom two
      • Shooting star
      • Triangle
      • Flag

One final difference in day trading vs. scalping and day trading is the use of stop-loss strategies. With swing trading, the stop loss is usually wider to match the balanced profit target.

What Stocks to Swing Trade

One of the first things you will learn from training videos, podcasts and user guides is that you need to choose the right security. In terms of stocks, for example, large cap stocks often have the level of volume and voltage you need. These stocks will usually oscillate between serious highs and lows.

This means you can swing in one direction for a few days and then when you see a reversal pattern you can switch to the opposite direction of the trade.

Finding the right stock pick is one of the basics of swing strategy. A useful tip to help you achieve that goal is to choose a platform with effective filters and scanners. There’s no point in having the best strategy if you’re speculating on the wrong underpriced stock.

The Right Market

Swing trading can be very challenging at both extremes of the market, a bear market environment or a raging bull market. Here you will find that very active stocks will not display the same up and down swings as when the index is relatively stable for weeks on end.

On the other hand, you will find a bear or bull market where the momentum will usually carry the stock for a significant period in one direction. This can confirm the best entry point and the strategy is based on the long-term trend. Basically, it’s when the market isn’t going anywhere in an ideal swing trading environment.

For example, if you’re trading on the Nasdaq, you’ll want the index to go up for a few days, down for a few days and then repeat the pattern. So even though after a few months your stock may be at an early stage, you have plenty of opportunities to take advantage of short-term fluctuations.

 

 

Using Exponential Moving Averages

Swing trading academy will take you through alerts, gaps, pivot points and technical indicators. But perhaps one of the main principles they will live by is the exponential moving average (EMA). This is simply a simple moving average variation but with an increased focus on recent data points.

Used correctly it can help you identify trend signals as well as entry and exit points much faster than simple moving averages. Basically, you can use the EMA crossover to build your entry and exit strategy.

Application

EMA system is simple and playable in swing trading strategy for beginners. You can use EMA, nine, and 50 period EMA.

Your bullish crossover will appear at the point where the price breaks above the moving average after starting below. This tells you a reversal and an uptrend may be in play. Then if your nine-period EMA exceeds the 13-period EMA, this warns you of a long entry. Having said that, the 13-year EMA must be above the 50-time EMA or actually cross over it.

On the other hand, a bearish crossover occurs if the asset price falls below the EMA. This tells you that there is a potential trend reversal. You can then use this to time out long positions. Therefore, if the nine-period EMA crosses the 13-period EMA, this warns you of a short entry or the need to exit a long position.

Having said that, the 13-year EMA must be below the 50-time EMA or cross below. Use the EMA correctly, with the right time frame and the right security in your crosshairs and you have all the basics of an effective swing strategy.

The Psychology of Swing Trading

It’s true that you can download various podcasts, audio books and PDFs that will give you swing trading examples, rules to follow and Heiken-Ashi charts to build.

However, what they often won’t tell you is how to mentally react when your swing trading strategy doesn’t work. With that in mind, you should consider the following three tips:

      1. Have a plan and stick to it – There will be highs and lows, that’s the nature of buying and selling in the market. However, let the math determine the ups and downs, don’t let your emotions get in the way. Deciding when to sell can quickly become an emotional decision when you have your whole week back on the line. Therefore, formulate a strategy and then stick to religion.
      2. Combat fear by reducing risk – Everyone’s appetite is different. So find the appropriate risk parameters. For example, you might want to start by not risking more than 2% of your account size in a single trade. This is something no mentor can teach you. Only through hours of practice will you learn where your personal limits are.
      3. Think long term – Too many traders obsess over the last or next trade. Don’t worry if you just lost gold futures. Instead, think of your long-term profit percentage and calculator. As Bruce Kovner rightly points out, “If you personalize losses, you can’t trade.”

Top Swing Trading Tips

Even some of the best forex books leave out some key trading tips and secrets, including:

      • Capitalizing on news – Markets always move in reaction to news events. Many sources, such as Yahoo Finance and CNBC will provide market analysis and commentary, using volume, price action and weekly charts. So, used correctly, the news can help you highlight potential picks and dividend stocks to keep an eye on, for example. It can also help you plan your entry and exit.
      • Never stop learning – As Paul Tudor Jones said: “The secret to success from a trading perspective is to have an infinite and insatiable thirst for knowledge and knowledge.” There is a wealth of information available to help you develop an effective cryptocurrency and forex strategy. Video tutorials, for example, can help teach you the Gann technique and how to use deep weekly in the money options. They can also take you through indicators for your MT4 platform and setting up daily stock signals.
      • Find the right broker & exchange – Everyone has different needs and preferences, so while a crypto swing trader might be best at Gdax or Binance, a very active forex swing trader might want to consider Dailyfx. Note they are also more than one place to consider securities quotes and exchanges. They can help you build a watch list, portfolio, and more.
      • Keep a Journal – Keeping an Excel journal can prove invaluable. Just note the price, date, position size and reason for entry and exit. This can help you see why your trading plan for a currency pair isn’t working on a weekly chart, for example.

How Much Money Can You Make?

Swing trading returns depend entirely on the trader. For example, taking ETFs vs. owned stocks, some will produce cheap returns with the former while failing badly with the former, even though the two trades are relatively similar. It also partly depends on the approach you take. Some individuals will praise the MACD indicator while others use the NMA system.

Just as some people will swear by candlestick charting with support and resistance levels, while others will trade on the news. The key is to find a strategy that works for you and around your schedule. See our strategy page for details on formulating an explained trading plan.

Final Thoughts

Although different from day trading, reviews and results suggest swing trading may be a good system for beginners to start with. This is because intraday trading in dozens of securities can prove too hectic.

Whereas swing traders will see their returns within days, by maintaining a high level of motivation. At the same time vs long-term trading, swing trading is short enough to prevent disruption. In addition, the requirements are low.

You need a broker account and capital, but after that, you can find all the help you need from online gurus to try and make a profit.

Also, swing trading can be effective in a large number of markets. But while learning how to start a chicken business as a part-time or full-time job may be relatively easy, your capital is at risk. Therefore, caution must be taken at all times.