Yesterday I talked all about one of my favorite patterns, the dip and rip.
In fact, I spotted one during my Monday’s Premarket Prep and it played the dip and rip to a tee.
In case you missed it, it’s in my blog post here.
This is a great pattern for new traders because it’s straightforward and easy to find.
The rip and dip is a day trading play that I love…
But what about traders who don’t want to be in front of the computer every second of the day, watching for patterns, trends, and prices that can move big within minutes?
That can be very rewarding for a lot of people but for some, maybe it’s too stressful.
And what about traders who don’t want to use a buy-and-hold strategy? They don’t want to buy a stock and wait months, or even years, for it to weather market fluctuations and economic cycles before it finally posts a decent return.
That takes a lot of patience and, in my opinion, it’s a snoozefest.
Is there a happy medium for people who don’t want either of these things?
And can this strategy make you money?
Well, let’s see…
NIO Inc. ADR (NYSE: NIO), the electric vehicle maker, had an awesome 2020. In October, after announcing record vehicle deliveries, NIO’s stock showed a bullish trend.
Right after the announcement, you were able to pinpoint a good entry around $21 per share.
The stock climbed steadily and reached around $54 by the end of November. If you saw the trend start to plateau, you exited your position and made a 157%* return… all in less than two months.
Here’s a chart of what happened during that time:
NIO 5-Year Chart, 1-Week Candles; SteadyTrade
It is possible to see a nice return without having to micromanage your trades or die from boredom as you wait forever.
If that sounds like a plan for you, you’ll want to know about this unique trading approach.
Some traders struggle with day trading for a variety of reasons…
Too much stress, not knowing the patterns, not understanding their risk tolerance…the list goes on and on.
And position trading, or a buy-and-hold strategy can be SO boring.
Enter swing trading.
Swing trading hits the sweet spot between day trading and long-term investing. With its moderate time frame and focus on trends, swing trading requires different techniques to narrow down your watchlist compared to other trading types.
So what is swing trading?
It’s a method where you hold stocks for a short but undefined amount of time, which could be overnight or even a few months.
It’s primarily about trying to capture a trend. A swing trader’s goal is to hold the stock long enough to profit from price swings, hence the name.
But swing trading only works if you can identify the right stocks. That’s why using a stock screener, like StocksToTrade is a great platform to use for this trading approach. It’s my go-to system.
Why should you swing trade?
For beginners, swing trading is a great way to start. The volatility and fast pace of day trading can be overwhelming, particularly for new traders. Swing trading is slower and gives you more time to consider your moves.
And swing trading offers excellent profit potential. It provides a nice balance between day trading and long-term investing while still offering plenty of profit opportunities.
Day traders focus on short-term market fluctuations while swing traders take a longer-term view and spend more time studying the fundamentals of the company.
And always remember, as with all strategies, swing trading can be risky.
If you’re new to swing trading or any kind of trading, you need to have a well-constructed plan. This will help you manage your risk and be prepared for whatever comes at you.
Watch my video to learn how to create your own trading plan.
Let’s look at an example of a swing trade:
Say Company XYZ’s stock fell due to negative news but has since gained momentum and volume. You expect its next earnings report to beat expectations so you buy shares to ride the upward price swing.
After the positive report, you sell for a profit.
That’s how swing traders use short-term price swings to profit.
So how do you know what to look for to spot a swing trade?
It can be a lot of work, especially when it comes to researching a stock’s financials and other financial data, knowing what to expect out of its next earnings report, etc.
Luckily, we have a tool that does a lot of that work for you.
It’s called IRIS and it’s the perfect system for swing traders. It uses the “Artificial Intelligence Code” (ASI) to give you everything you need….
Is swing trading profitable?
Like I showed you with NIO, this approach can be profitable, but it’s not guaranteed. Factors beyond your control can affect trade outcomes.
Traders must develop a robust strategy, use a good stock screener, and know when to cut losses.
Swing trading strategies:
On top of the fundamental research, swing traders use multiple technical indicators in their strategies.
These include moving averages, volume, Bollinger Bands, the Relative Strength Index (RSI), support and resistance strategies, and other data.
To learn more about technical indicators, watch my video:
Is swing trading right for you?
Swing trading involves longer holds than day trading, so you must research stocks and use technical indicators and fundamental analysis to track potential uptrends.
Fortunately, our in-house AI trading tool, IRIS, takes much of the work out of swing trading preparation.
As a subscriber to our IRIS system, you get weekly live training sessions, an ASI-generated watchlist, weekly analyst reports, and much more.
Click here to subscribe to IRIS and get everything you need to be a successful swing trader.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade