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Swing Trading: Strategies For Becoming A Successful Swing Trader Stock News & Stock Market Analysis IBD

best swing trading strategies

That’s not to say that you shouldn’t listen to other traders. You just need to listen to them longer than it takes to get a stock tip. When a stock moves counter to expectations, it’s easy to think it’ll reverse course. And when you hold onto an idea in spite of evidence to the contrary, you can lose BIG. This goes double for when you’re not keeping a close eye on the market. Ideally, you want your target stock to have a lot going for it.

Such indicators look for declining trading volume and price patterns that indicate a pivot may be imminent. Here is an example where indecision candles help to signal a short-term price reversal. There was also a divergence present at the time of the trade.

Understanding Swing Trading

Then you’ll own the security for less than its post-breakout trading price. With options contracts, you’re projecting whether the price will go up or down by a future date. Holding an options contract gives you the right to buy (a call option) or sell (a put option) a security in the future for a set price. You’re not obligated to buy or sell if the stock doesn’t do what you want, but you’ll be out the price of the contract.

  • And if a certain trade doesn’t look like it will meet your profit target, take profits while you can.
  • Swing traders monitor these trading continuation patterns and identify gaps to determine how they will trade.
  • It still offers significant profit potential for intermediate and advanced traders.
  • Challenge mentor Tim Lento has total earnings north of $3 million.

It is not uncommon to see strategies with as low as 25% winning trades, that is compensated by outsized winning trades. In other words, the market is performing a wild swing, away from its mean, which is followed by the reversion to the mean. Sticking with two of these types of strategies allows you to build up your portfolio and walk away from the computer. Far too many traders are stuck to their computer screens trying to make a living every day. Using Quantpedia is best for retail traders and institutional investors looking for a shortcut. You are on the right side of the market, and eventually, people need to start selling their stock that is now losing money, only to accelerate the market in your favor again.


That gives the swing trader an opportunity to make money both on the upside and in declines. Because of its short-term nature, swing trading is very different than buy-and-hold investing. The gains may be small but, if you execute it properly and consistently over time, can easily compound into pretty great annual returns. For example, position or trend traders may wait six months to earn a 30% profit. Whereas swing traders may earn steady 5% gains every week and could eventually record more gains than the other traders in the long run. Although this book does not focus solely on swing trading, it is a valuable read for anyone who wants to swing trade.

best swing trading strategies

Swing trading is a market timing strategy where traders speculate on the direction of market price over short-to-medium-term time frames, ranging from one day to a few months. Swing trading can be utilized for any tradable security, including stocks, fixed income, commodities, currencies, cryptocurrencies, futures, and options. The exponential moving average (EMA) 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.

Learn How I Turned $12,415 into

Smaller gains can only produce growth in your portfolio if losses are kept small. Rather than the normal 7% to 8% stop loss, take losses quicker at a maximum of 3% to 4%. This will keep you at a 3-to-1 profit-to-loss ratio, a sound portfolio management rule for success. It’s a critical component of the whole system since an outsized loss can quickly wipe away a lot of progress made with smaller gains. Actively monitor your trade throughout the holding period. Beware of slippage and gapping and changes in the market sentiments.

best swing trading strategies

We will also provide some strategies that we think demonstrate the logic in a nice way. Just keep in mind that these are just examples and might not work. You allow the market to work for you by swing trading, and you only need to check them occasionally. Make your money work for you, don’t work for it and keep in mind that some of these trades won’t work out. Pyramiding is a reference to adding more and more positions in a particular direction. Swing traders are looking to take advantage of big moves, so it makes no sense to take your profits right away if you can avoid that.

Fading is based on the idea that the market will slightly return to its recent average price after a strong movement. Hence, traders look to enter the market as soon as the price swings lower and quickly exit before the end of the countertrend and the market goes back to its main trend again. It starts with identifying a strong trend that sets a new high past the resistance line.


If you ever have tried to swing trade the market by using your gut feeling, the chances are that you have not been very successful. The ability to feel what the market is about to do is an ability that very few of us possess. The available strategies range from trend following and market timing strategies to stock picking and asset allocation models for equities, bonds, forex and commodities. Quantpedia is an encyclopedia of quantitative and algorithmic trading strategies. The team behind Quantpedia turns academic research into a real trading advantage. They already identified 600+ trading systems by reading tens of thousands of financial research papers and turning those learnings into ideas for trading strategies.

best swing trading strategies

But since you’re only holding the stock for a short period of time, you can take advantage of the market volatility and potentially take profits in a relatively short window. But occasionally I do short-term swing trades… And I mean short. The longest I stay in these positions tends to be overnight. I might buy at the close and sell at the open the following day. In addition to those listed above, several other tools and indicators are often used by swing traders. These include Kagi charts and Gann angles, which can remove some of the noise to show the strength of existing trends.

Get Started With Our Simple Swing Trading Strategy

Using technical indicators can reduce the risks of speculative trading and help you to make clear decisions. While some swing traders pay attention to fundamental indicators as well, they are not needed for our simple strategies. Swing trades are also viable in actively traded commodities and forex markets. Some of the more common patterns involve moving average crossovers, cup and handle patterns, head and shoulders patterns, flags, and triangles. Key reversal candlesticks may be used in addition to other indicators to devise a solid trading plan. On the pro side of swing trading strategies is a more relaxed pace.

  • I might buy at the close and sell at the open the following day.
  • This article will focus on using oscillators and candlestick patterns to identify swing trades.
  • And those trades you take can last for one day up to several days and even weeks (and possibly longer if  the trade is still working and you are not stopped out).
  • Swing traders are looking to take advantage of momentum and they will hold their trading positions for longer periods than a day trader.
  • There’s no fixed period of time for holding swing trading positions.

If they are risking $1 per share on a setup that could reasonably produce a $3 gain, that is a favorable risk/reward ratio. On the other hand, risking $1 only to make $0.75 isn’t quite as favorable. Swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks.

The consequence of this is that the market is not priced correctly. Instead, it is a reflection of the current demand and supply, which in turn is a reflection of the mood of the market participants. Mean Reversion, or regression to the mean, is a concept that was first observed by Francis Galton. In short, it explains how extreme events are very likely to be followed by more normal events.

As swing trading strategies typically involve holding positions over multiple days, traders should carefully consider overnight fees. Overnight fees are usually based on the size of the original order. It is worth noting that assuming short positions may result in the broker paying overnight fees back to you. Jim Simons is often hailed as one of the most successful swing traders.

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