Aside from a, the trader could also utilize other exit methods, such as waiting for the price to make a new low. With this method, an exit signal wasn’t given until $216.46, when the price dropped below the prior pullback low. This method would have resulted in a profit of $23.76 per share. Thought of another way—a 12% profit in exchange for less than 3% risk. The best time of day to enter a swing trade is when the markets are most active and there is increased volume and liquidity.


Trade positions are subject to overnight and weekend market risk. It is best to avoid news events that could cause high volatility in the markets such as central bank announcements, economic data releases, corporate earnings reports, and political events. It’s hard to set a number that applies to everybody, since everyone has a different risk tolerance. However, as a general rule of thumb, you should make sure to not risk more than a few percents of your capital on each trade. Due to this, you want to ensure that the stocks you trade have enough volume so that your orders will be executed efficiently, with as little slippage as possible. For example, if you’re trading the Russels 2000, you will have 2000 stocks to choose from, which is a lot.

In addition to those stand-alone solutions, most brokers offer some kind of platform where you can execute your trades and get access to market data. The fact that you can easily swing trade while working full time, means that you don’t have to be stressed about making money each month. You have your paycheck coming in every month, and will survive regardless. Historical data- If you want to develop your own strategies for your swing trading, you might have to buy additional data that goes further back in time.

Retracement Trading

Day traders typically utilize larger position sizes and may use a day trading margin of 25%. Swing traders primarily use technical analysis, due to the short-term nature of the trades. That said, fundamental analysis can be used to enhance the analysis. For example, if a swing trader sees a bullish setup in a stock, they may want to verify that the fundamentals of the asset look favorable or are improving also. Typically, swing trading involves holding a position either long or short for more than one trading session, but usually not longer than several weeks or a couple of months.

Traders who are patient and disciplined are more likely to be successful at swing trading. The best way to enter a swing trade is to wait for a confirmed trend. You can enter the trade when the price action confirms the trend by breaking through a key resistance or support level. While knowing technical analysis doesn’t make you a profitable trader on its own, you must use it if you want to build a technical trading system. Technical analysis is merely a tool to describe and quantify market behavior. As such, it’s possible to quantify both profitable and losing setups.

moving average

Technical indicators of support and resistance levels are imperative. But what is very difficult is finding accurate indicators over time. For example, parallel levels are simply the highest and lowest traded values within a specific timeframe. Moving averages can also serve as support and resistance indicators when a stock’s price is trending up or down. There are many benefits to be had from swing trading, making it a popular trading strategy for traders of all levels. Swing traders particularly look for continuation and reversal patterns.

This active trading offers the information necessary for what’s called technical analysis, which we’ll cover in the next section. Identifying when to enter and when to exit a trade is the primary challenge for all swing trading strategies. However, swing traders do not need perfect timing—to buy at the very bottom and sell at the very top of price oscillations—to make a profit. Small consistent earnings that involve strict money management rules can compound returns over time. ] that mathematical models and algorithms do not work for every instrument or market situation. One of the key characteristics of the most successful swing traders is the ability to trade without emotion.

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A swing trader can enter a trade when an asset’s price retraces to the 61.8% level and look to exit when the price hits the 23.6% level. Fibonacci provides definitive price levels where swing traders can achieve attractive risk/reward propositions. Indices are statistical measures designed to track the performance of baskets of related stocks.

  • This often results in trades that generate huge profits compared to the risks involved while taking them.
  • Start swing trading to potentially profit from your trading edge.
  • 78% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider.

An important thing to remember when trading off support and resistance levels is that when price breaches the levels, they switch roles. For instance, if the price breaches a support line, the line turns into a new level of resistance. Swing trading is a versatile strategy that can be applied in a variety of markets. Swing trading strategy FAQs include questions about how to identify the right indicators to use, how to set stop-loss orders, and how to manage risk in volatile markets. A swing trading strategy video provided valuable visual demonstrations of how to trade the strategy. The basic principles for swing trading that every beginner should adhere to is to only buy uptrends and only sell downtrends.

You might NOT want to be a swing trader if:

Swing trading exposes a trader to overnight and weekend risk, where the price could gap and open the following session at a substantially different price. Swing trading and trading in general is a lonely profession and hobby. Make sure to find other trades to collaborate with to exchange ideas and experiences.

Several ways, but the first thing we want to is narrow our universe of stocks to trade. The first way to do that is to elect to trade leading stocks within leading sectors. 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. However, a day trader can take advantage of several opportunities throughout the day. It is important to remember that every trading style has its pros and cons, and it is up to you the trader, which one you will choose. trading is best suited to markets with high liquidity and low volatility. One tendency that many new traders have, is to dwell on the mistakes and losses that they made. So, in other words, we recommend that you start by coming up with an idea that tries to define oversold conditions in the market. That is those times when the market is likely to snap back to its average because it overextended itself.

However, it’s coding language is a little more difficult than that used by TradeStation and Multicharts. TradeStation also has advanced backtesting features that let you backtest on a basket of symbols. You could run a test on all the stocks in the S&P- 500 and see how the strategy performed across all 500 stocks.

You sell and go short when the 5-hour moving average crosses below the 20-hour moving average. Free Investing Webinar Learn all the ways IBD’s top investing tools can help you succeed in the market! Make more money in stocks with 2 months of access to IBD Digital for only $20! Introducing OptionsTrader by IBD IBD has entered the world of options!

Now we have reviewed the most popular swing trading strategies, follow the below steps to open an account with us, so you can get started to swing trade stocks. There’s a countless number of successful swing trading strategies. With that said, swing traders must properly identify when to enter and exit positions; if read incorrectly, there is the risk of loss of capital. The exponential moving average is a variation of the SMA that places more emphasis on the latest data points. The EMA gives traders clear trend signals and entry and exit points faster than a simple moving average. The EMA crossover can be used in swing trading to time entry and exit points.

What Percentage of Swing Traders Make Money & Are “Successful”?

Then maybe you would be a better scalper or learn to manage risk better. The break below the middle Bollinger Bands is a clear signal of the shift in market sentiment. Next, we need to make sure you have access to the proper indicators for this strategy. Weekly notifications about upcoming events, as well as market updates, newly posted articles and videos, delivered straight to your inbox.

Under normal market circumstances, there are “trend days,” or trading sessions that trade directionally, with high-conviction the entire day, per month. On these days, a swing trader’s positions, if they’re in harmony with the trend day, will typically see nice gains. Learn how to read stock charts and analyze trading chart patterns, including spotting trends, identifying support and resistance, and recognizing market reversals and breakout patterns. Swing trading is a trading strategy where investors buy a stock or some other asset and hold it — known as holding a position — for a short period of time in the hopes of turning a profit.

Swing trading using technical analysis which is based on spotting patterns and acting. Moving average convergence/divergence is a momentum indicator that shows the relationship between two moving averages of a security’s price. After liquidating your position and capturing profits, chances are greater that general market securities are now more expensive if broad markets have appreciated. The best candidates are large-cap stocks, which are among the most actively traded stocks on the major exchanges.

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