Swing trading is a basic type of short-term market speculation where positions last for more than one day. It can be used to trade forex, futures, stocks, options, ETFs and cryptocurrencies. On this page, we will take an in-depth look at what swing trading means and some key strategy techniques and tips. The advantages and risks of swing trading are reviewed along with indicators and daily charts, finishing with some key take points.

 

 

What is Swing Trading?

A simple definition of swing trading for beginners is that the user holds the instrument from overnight to several weeks and tries to capture the gains. As the training guide emphasizes, the goal is to capitalize on price movements larger than the time of day. However, since it follows a larger price range and move, it requires a calculated position size, reducing downside risk.

To this end, individuals require technical analysis to identify commodities with short-term price momentum. This means following the basics and principles of price action and trends.

Swing trading setups and methods are usually done by individuals rather than large institutions. This is because large companies usually trade at too large a volume to deposit and withdraw securities quickly. However, as the examples show, individual traders can take advantage of short-term price movements.

Swing trading benefits

As forums and blogs are quick to point out, the advantages of swing trading include:

  • Application – Swing trading can be effective in markets and long lists of commodities. 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 online resources to help you become one of our success stories. There are e-books, video training courses, PDFs, apps, tutorial lessons, and a full website. All can give you ideas about forex strategies, general trading plans, and useful tips for identifying patterns. Also join our Discord chat to join an active swing trading group.
  • Tools – You can swing trades using candlesticks and other techniques on a variety of platforms, from Robinhood to MetaTrader. There are also options using automated bots and expert advisory software (EAs). When used correctly, you can execute a lot more swing trades than you can manually.
  • MINDSET – As our success stories show, if you have the attributes you need for effective day trading, you may have the attributes you need to swing your trades. For example, are you a patient? Do you have a big loss loss? Do you want to trade less while paying close attention with a few setups? If so, you should already have the qualifications and training of a successful swing trader.

risks

Before you give up your job and start swing trading for a living, here are some downsides:

  • Market Risk – Rule 101 – You can definitely lose money. Some have made it look easy, but you will feel your mistakes where they hurt the most. Unfortunately, like the nature of market speculation, lessons are often only learned the hard way. You can also lose more than your initial investment by trading on margin and using leverage.
  • Time – Swing trading is not one of the types of trades that you can enter a position and see confirmation a week or so later. This is a strategy that is real-time trading and requires consistent monitoring. This means that juggling swing trades on a full-time job can be challenging.
  • Tax – Swing trading is not necessarily exempt from tax. In fact, in the US for example, you can get caught under pattern day trader laws. So first make sure you can meet all the obligations of the financial system.
  • Risk Management – Whether you are interested in penny stocks or using algorithmic services, failure to implement an effective risk and money management strategy can result in significant costs. Harry Lite, a successful trader, said: “Throughout my financial career, I have witnessed time and time again examples of others I know of as not respecting risk. It will be dangerous if you don’t look carefully for the risks.”
  • Psychology – Do you like a dynamic and fast-moving trading environment? Need to know right away whether you are right or wrong? If so, you may not have the mindset necessary to become a millionaire and master of swing trading.

These are not set rules for swing trading. However, you can use the checklist above to see if the dreams of millions are already limited.

Day trading and swing trading

The main difference is the hold time of the position. As the name implies, day trading means closing positions before the end of the market day. However, as you trade, you run the risk of opening overnight gaps depending on your position, as chart patterns are displayed. As a result, when swing trading, day traders often have smaller position sizes than day trades because they use leverage to take larger position sizes.

However, swing traders can take advantage of up to 50% margin overnight. However, as lessons and advice from veteran traders point out, swing trading on margin can be seriously risky, especially if a margin call occurs.

So, swing trading or day trading is not about what you want to trade, like commodities like oil futures or stocks at Cac 40. Instead, it is simply time. So while day traders may look at 4-hour timeframes and daily charts, swing traders will be more interested in multi-day charts and candlestick patterns. In fact, the most popular are:

  • Moving average crossover
  • Head and shoulders pattern
  • Cup and handle pattern
  • Double bottom
  • Shooting star
  • Triangle
  • flags

The last day difference between swing trading and scalping and day trading is the use of stop loss strategies. In the case of swing trading, the loss is usually widened equal to the proportional profit target.

Stocks to trade

One of the first things you learn from instructional videos, podcasts and instruction manuals is that you need to choose the right securities. For example, from a stock perspective, large cap stocks often have the required amount and level of volatility. These stocks usually fluctuate between highs and lows. This means that you can move in one direction for several days and turn it into the opposite side of the trade when you spot a reversal pattern.

Finding the right stock picks is one of the fundamentals of swing strategy. A useful tip for this is to choose a platform with effective screeners and scanners. There is no point in using the best strategy if you’re guessing low-end stocks incorrectly.

The Right Market

Swing trading can be particularly difficult in the extremes of two markets: a bear market environment or a raging bull market. Here you can see that even very active stocks won’t exhibit the same up and down oscillations as when the index is more or less stable over several weeks.

Instead, in a bear or bear market, momentum will usually hold a stock for a significant period of time in one direction. This allows you to identify the best entry points and your strategy is based on long-term trends.

In essence, it’s when the market isn’t heading to a place that has an ideal swing trading environment. For example, if you trade the Nasdaq, the index may rise for a few days, fall for a few days, and then repeat the pattern. So while it could be the stock’s initial levels over the course of a few months, there were plenty of opportunities to capitalize on short-term volatility.

 

 

Use exponential moving average

Swing Trading Academy guides you through warnings, gaps, pivot points and technical indicators. However, one of the main principles they will guide you with is the Exponential Moving Average (EMA).

It’s just a variation of a simple moving average, but the latest data points are of increased interest. When used correctly, it can identify trend signals and entry and exit points much faster than simple moving averages. Basically, you can build an entry/exit strategy using EMA crossovers.

Application

The EMA system is simple and can be incorporated into any swing trading strategy for beginners. 9, 13 and 50 period EMAs are available. A bullish crossover appears at the point where price breaches the moving average after starting below.

This signals a reversal and may start an uptrend. Then, a long position is signaled when the 9-period EMA exceeds the 13-period EMA. However, the 13 period EMA should be above the 50 period EMA or really above it.

Conversely, a bearish crossover occurs when an asset’s price falls below the EMA. This indicates that there may be a potential reversal of the trend. You can then use it to time your exit from a long position.

So, if the 9-period EMA breaches the 13-period EMA, it signals that a short entry or long position should be exited. The 13 period EMA should be at or below the 50 period EMA.

Utilizing the EMA correctly, with the right time frame and the right security in your crosshairs, you have all the basics of an effective swing strategy.

The psychology of swing trading

Podcasts, audiobooks and PDFs are all available for download that offer swing trading, rules to follow and Heiken-Ashi charts to build on. But what they often don’t tell you is how to mentally react when your swing trading strategy doesn’t work.

With that said, you should consider these three tips:

  1. Make a plan and stick to it – there will be highs and lows in the market, which is the essence of buying and selling. But let the math dictate its ups and downs, and don’t let your emotions get in the way. Deciding when to sell can quickly become an emotional decision when it comes to making money on a full week basis. So make a strategy and stick to it religiously.
  2. Battle fear by reducing risk – everyone’s appetite for risk is different. So find the right risk parameters for you. For example, you may not start risking more than 2% of your account size on a single trade. This is something no mentor can teach you. Only through practice time will you know where your personal limits lie.
  3. Think long term – too many traders obsess over the last or next trade. Don’t worry if you only lose your gold gift. Instead, think about long-term profit margins and calculators. As Bruce Kovner aptly pointed out, “You cannot trade if you personalize your losses.”

Swing trading top tips

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

  • Take advantage of news – Markets are constantly reacting to news events. Many resources such as Yahoo Finance and CNBC provide market analysis and commentary using volume, price action, and weekly charts. Proper use of news can therefore help highlight potential options and dividend stocks, for example. It can also help you plan your warehousing and warehousing.
  • Never Stop Learning – Paul Tudor Jones famously said: “The secret to being successful in terms of trade is to have an indomitable and unquenchable thirst for information and knowledge.” We have a wealth of information to help you develop an effective cryptocurrency and forex strategy. For example, video tutorials help teach you how to use the Gann technique and money weekly options. You can also guide users through setting indicators and daily stock alerts for the MT4 platform.
  • Finding the right broker and exchange – everyone has different needs and priorities. So while a single crypto swing trader might be best leveraged on Gdax or Binance, active forex traders might consider Dailyfx. They are also not the place to consider quotes and exchange securities. It helps you build different watchlists, portfolios, and more.
  • Keep a journal – Keeping an Excel journal is very important. Simply note the reason for the price, date, size of the location, and point of entry and exit. For example, you can see why smaller plans on currency pairs don’t work on the weekly chart.

How much money can you make?

Swing trading profits are entirely up to the trader. For example, leveraging ETFs vs. stocks, some trades are relatively similar, but the latter may fail and the latter may fail.

 

It also depends in part on your approach. Some individuals praise the MACD indicator while others use the NMA system. Some swear by using candlestick charts of support and resistance levels, while others trade with news.

The key is finding a strategy that works for you and your schedule. For more information on formulating a trading plan, see our strategy page.

Final thoughts

Unlike day trading, reviews and results suggest that swing trading can be a good system for beginners to start with. That’s because intraday trading on dozens of securities can be so poor. Swing traders can see profits within days, but their motivation levels remain high. At the same time, long trades versus swing trades are short enough to prevent distraction.

Also, the requirements are low. You will need a brokerage account and some capital, but after that you can find online experts all the help you need to start making money. Additionally, swing trading can be effective in numerous markets.

However, while it may be relatively straightforward to learn how to start swing trading part-time or full-time, your capital is at risk. So you should always be vigilant.