Jesse Livermore, one of the biggest traders who ever lived, said that big money is made from big swings in the market. In this regard, Livermore has successfully applied an effective swing trading strategy. He has been able to achieve remarkable financial results through this. A simple swing trading strategy is a market strategy in which trades are held for more than one day. It is usually held between 3 days and 3 weeks. Here’s how to identify the right swings to increase your profits.

 

The Trading Strategy Guides team has already written about other swing trading strategies that work. Read our Harmonic Patterns Trading Strategy – A Step-by-Step Guide or MACD Trend Following Strategies – Easy-to-learn Trading Strategies. These are some of the most popular strategies published in our trading strategy guide.

This time I will explain a simple swing trading strategy. Similar to what Jesse Livermore used for trading. Let’s review the swing trading strategy Livermore used to predict the biggest stock market crash in history. The 1929 Wall Street Crash, also known as Black Tuesday. Another strategy called the Day Trading Strategy is sane.

By the way, after the stock market crash of 1929, Livermore is said to have made $100 million. Adjusted inflation is estimated at about $1.43 billion today.

Quite a lot of money, don’t you say that?

Get started with a simple swing trading strategy

If you take a swing trading course now, current market conditions believe that traders using proper trading techniques can achieve tangible results. There are a few things to consider before getting started.

One of them is deciding whether you should trade a counter trend system or a trend stock setup. Either may work, but it is up to you to decide which one to use. I recommend using paper trading for stock trading the next time you advance once.

This article will go in-depth on the main swing trading techniques on daily charts. This may be considered advanced trading, but this strategy is suitable for all investors. Perfect for home study. We will teach you how to do proper technical analysis and when to enter and exit trades. We will do this by teaching you how to set the right profit targets.

It is important to have a fully developed training plan before you start trading swing trading systems. This will prepare you to work more successfully and participate in the rankings of professional day traders. We will give you trading opportunities and help you in every way we can to become the best swing trader. You can also learn how bankers trade in the Forex market.

What is swing trading?

The swing trading strategy is very simple. Swing traders use intermediate time periods (usually days to weeks) to identify market trends and open positions. The name swing trading comes from the fact that we are looking for conditions where prices are likely to swing either up or down.

Swing traders can use a variety of technical indicators. What makes swing trading unique is that it blends the multiple components of day trading with the speed of position trading. Swing trading indicators are primarily used to look for trends that occur between 3 and 15 trading periods. After analyzing this period, you can determine if a case of resistance or support has occurred.

The next step is to identify a bearish or bullish trend and look for a reversal. A reversal is often referred to as a pullback or counter trend. Once the counter trend becomes clear, you can choose an entry point.

The goal is to get into a position where the reverse trend is quickly reversing and the price is rising. This is exactly what allowed Jesse Livermore to earn most of his fortune.

now…

Before looking at some of the key rules that make swing trading strategies work, let’s first look at the benefits of using a simple swing trading strategy. You can also read about budgeting in Forex to trade better.

What are the advantages of a simple swing trading strategy?

The main advantage of swing trading is that there is a large risk reward trading opportunity. In other words, you risk a smaller amount of your account balance for a potentially much greater benefit compared to your risk.

The second benefit of using a swing trading strategy that works is that it eliminates a lot of intraday noise. Now you will trade like smart money to make big money. Also read our best guide to Ichimoku Cloud.

The third benefit of swing trading relies on the use of technical indicators. Technical indicators help you reduce the risk of speculative trading and make clear decisions. Some swing traders pay attention to fundamental indicators as well, but this isn’t necessary for simple strategies.

One last benefit of using the simple swing trading strategy is that you don’t have to be glued to your screen all day like the Day Trading Strategy. Swing trading plans work on all markets including stocks, commodities, forex currencies and more.

Like any other trading strategy, swing trading comes with some risks. Because swing trading strategies take days or even weeks to execute, you run the risk of “gaps” when trading overnight or on weekends.

Another risk in swing trading is that a sudden reversal can cause you to lose your position. Since you don’t trade all day, it’s easy to get caught off guard if price trends don’t go as planned. To reduce the risk of this happening, we recommend issuing a stop order for each new position. Stop orders can help you “lock in” your profits and cut your losses.

now…

Before we start, let’s take a look at the swing trading indicators you need.

The only indicators you need are:

Bollinger Bands Indicator: It is a technical indicator developed by John Bollinger. Bollinger Bands are designed to spot overbought and oversold areas in the market. It also measures market volatility.

Our swing trading indicators make it easy to manage the risk of your trades and take advantage of price movements. Using candlestick trading charts can also be helpful. This chart provides more information than a simple price chart and makes it easy to see if a sustained reversal is occurring.

Many swing traders also keep a close eye on multi-day chart patterns.

  • Head and shoulders pattern
  • Flag pattern
  • Cup and handle pattern
  • Moving average crossover (also consider Ichimoku Cloud)
  • Triangle trading pattern

When there are high lows alongside stable highs, this indicates to traders that a period of consolidation is underway. Consolidation usually occurs before a major price movement (in this case it is negative). Learning about triangle trading and other geometric trading strategies will make you a much better swing trader.

This swing trading indicator consists of 3 moving averages:

  • A centered moving average is a simple moving average.
  • And on either side of this simple moving average are two other moving averages that are 2 standard deviations away from the central moving average.

The picture above shows what Bollinger Bands look like. Most trading platforms come with this indicator in their list of default indicators.

If you want to learn more about how you can profit from this amazing indicator, the Bollinger Bands, take a look at our Bollinger Band Bounce Trading Strategies.

This is the default setting for swing trading indicators because it makes the signals more meaningful. We came to this conclusion after testing our strategy based on several inputs.

Now let’s move on to the most important part of this article, the trading rules of the swing trading strategy.

It’s always a good idea to write down your trading rules on paper before you go any further. This exercise will take your learning curve up a notch and you will become a trader trader expert in no time.

Let’s begin…

 

 

Swing trading strategies that work

(Trade Rules – Trade Trade)

This strategy actually consists of two elements. The first element of a swing strategy that works is the entry filter. For our entry filter, we will be using one of our favorite swing trading indicators, the Bollinger Bands. The second factor is the price action based method.

Step 1: Wait for the price to touch the upper Bollinger Band.

The first factor you want to see in a simple trading strategy is that the stock price needs to move into overbought territory. Any swing trading strategy that works should include this element.

Note * The preferred timeframe for this simple swing trading strategy is 4 hours. This strategy can also be used on daily and weekly hours.

Step 2: Wait for the price to drop below the Middle Bollinger Bands.

After we touch the top of the Bollinger Bands, we are in an overbought zone and want confirmation that the market will reverse. In this case, the logic filter is taking care of the break below the middle Bollinger band.

A break through the middle of the Bollinger Band is a clear sign of a change in market sentiment.

Trading Strategy Guides don’t do small trades without determining whether there is an actual buyer/seller (in this case, the seller) behind the small traders. This brings us to the next level of our simple swing trading strategy.

Step 3: Swing Trading Indicator: The Breakout Candle should grow a large bold candle that closes near the low range of the candlestick. → Sell at the close of the breakout candle.

So far, our favorite swing trading indicator has accurately predicted these sell-offs, but we’ll use a very simple candlestick-based method to trigger the entry. For entry, we would like to see a big bold herb breaking below the middle of the Bollinger Bands.

The second element of this candlestick-based method is that it requires a breakout candle near the lower range of the candlestick. This indicates strong sellers looking to make this currency pair much lower.

Any swing strategy that works requires a very simple entry filter.

Now we move on to the next step in our simple swing trading strategy as we still need to define where to place our protection stop losses and where to take profits.

Step 4: Hide a protective stop loss above the breakout candle.

Breakout candles make a lot of sense because I used them for candlestick-based entry methods. We show you that these candles have real sellers on the market. If the top of this candle is broken, it’s pretty clear that this is a real fake as there is no real seller.

Isn’t it complicated?

To learn more about this breakout technique and how to manage breakout trades, read our article Breakout Trading Strategies Used by Professional Traders.

The next part of our simple swing trading strategy is an exit strategy based on your favorite swing trading indicator.

Step 5: Break above the middle Bollinger Band and take profit again.

In this particular case, we are looking at a short trading example. So if price rebounds above the mid-Bollinger Banks, it could signal a reversal, so it’s something to be concerned about.

The reason for the profit here is easy to understand. We try to book profits on early signs that the market is ready to roll over.

Note * The above is an example of a SELL transaction. Use the same rules for BUY trades. In the picture below you can see an example of a BUY trade in action using a simple swing trading strategy.

summary

Some complex strategies can be too overwhelming and confusing. A simple swing strategy can be all you need to succeed in this business. Albert Einstein, the greatest scientist in history, once said, “Everything should be as simple as possible, but it shouldn’t be simple.” You can also read How to Make Money Transactions.

A swing trading strategy should consist of a swing trading indicator that helps you analyze trend structure, and a price entry method that looks at price action, the second ultimate trading indicator.

We have different trading styles, and if swing trading isn’t your thing, you can try our simple scalping strategies: The Best Scalping Systems to get the attention of the community.