Trading Plans
Feb. 16, 202416 min read

Swing Trading Strategies: Complete Guide

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Written by Tim Bohen

Is it time for you to learn swing trading strategies?  This is a complete guide on getting started.

This is a popular shorter-term trading style. It might fit you, depending on your lifestyle and trading goals.

First of all, how’s your heart?

If you don’t thrive on adrenaline, day trading might not be for you. Definitely don’t take that as a challenge, either! There are lots of reasons why day trading might not be right for you.

Maybe work is getting crazy. You might have young kids. Other things in life might demand your attention. 

We’ve all been there. Trading shouldn’t be something you force into your lifestyle. That isn’t a way to become a consistent trader. And it isn’t the way to enjoy the potential benefits you can get out of trading.

Whether it’s a temporary or a permanent change, you might want to consider getting to know swing trading strategies. 

Even if swing trading isn’t your long-term goal, you should still learn about it. Say, for instance, you’re under the PDT rule. Learning how to swing trade could save you a day trade here and there. 

See how awesome it can be to learn more about the markets? Now, let’s check out what you should know about swing trading strategies.

What Is Swing Trading?

By definition, swing traders hold a position longer than one day. Sometimes swing trades can last for weeks or even a couple of months.

With swing trading, overall price trends are more important than intraday price movement.

What Is a Swing Trading Strategy?

Your swing trading strategies might be pinned to support and resistance swings. Or it could hinge on uptrends and downtrends. It’s an idea about price movement that you plan to commit to through the ups and downs of a trading day.

Any effective strategy will lead to consistent results. So it’s a question of what makes the most sense to you.

Day traders rely on a trading plan, catalysts, and some technical indicators. But ultimately, they react to the market.

With swing trading, the rules are the same. But swing trading strategy can tie you more closely to a stock’s catalysts and trends.

Does Swing Trading Work?

That all depends on how well you build and execute your trading plan.

2020 gave many a crash course in effective swing trading. A lot of the hottest swing plays just made sense. 

The lockdown made hot sectors out of at-home fitness, food delivery, and virus-related stocks. At the same time, sectors that rely on people leaving their homes suffered. 

So for traders who can catch the trend and trade with a solid plan, there can be opportunity. Some could have swing traded some of these stocks for a few months. 

You can also swing trade a stock on the back of smaller catalysts. Some swing traders hold onto positions for as little as one night. They try to time their exit before the uptrend peters out.

Is Swing Trading Safer than Day Trading?

Like everything else, this depends on your risk management and strategy.

Do you work a 9-to-5? Day trading probably isn’t for you.

But if you have a choice between the two, you need to ask yourself some questions. Do the patterns you’re skilled in lead to day trading plays or longer moves?

How about the volatility of the stocks you trade? 

Once you know what you’re getting into, think about the pros and cons. Remember, no trade is worth risking the health of your trading account.

Pros and Cons of Swing Trading

The pros and cons of swing trading strategies are like two sides of a coin.

On the pro side of swing trading strategies is a more relaxed pace. Maybe you want to take a walk during trading hours. Or trade larger-cap stocks with a bit more stability. Or play out your position past the point that most day traders get stopped out.

Think about what’s good here… 

  • More time to think out your process and make educated trading decisions. 
  • The possibility of more stability in your trades. 
  • Committing to your trading plan.

On the other hand, these can be the cons as well. When you’re not watching the market, stocks can move and you could take a big loss. If you opt for more stable trades, you might miss out on the volatility that can help grow a small account. And when you commit to the idea of a trade rather than its reality, you won’t cut your losses as quickly.

All trading is risky. And staying in a position for longer could expose you to greater risk.

How to Start Swing Trading

Getting into swing trading is like starting with any other trading approach. There are two sides to it — practical and mental.

The practical side is the ‘swing trading for dummies’ portion. Start with some money and get a broker. That’s pretty much it.

That doesn’t necessarily mean trading smart.

So if you want to swing trade well, work on your education. You’ve made it this far, so you’re already starting to build it up.

Try following this up with some of the no-cost resources StocksToTrade has to offer:

3 Best Swing Trading Strategies to Follow

We’ve covered the swing trading basics. But if you’re gonna commit to this style, you should know some more advanced swing trading strategies.

Fibonacci Retracement

With swing trading, technical indicators like this are really important. 

Fibonacci retracements and ratios can be super valuable in your trading. This indicator is based on a stock’s highs and lows, as well as ratios within this range.

The idea is that these ratios can predict future consolidation levels. If the chart ends up following the prediction, it might be a buy.

Remember — nothing a technical indicator says is a guarantee of future stock performance. It’s just a guide to market patterns. And it’s an idea you can use in your trading plan.

Support and Resistance Triggers

Support and resistance indicators refer to price points a stock doesn’t go below (support) or above (resistance).

Think of support and resistance as the walls of buyers and sellers that make up the stock market. If it goes too low? There are typically enough people to buy and boost the price. Getting a bit high? There are a ton of sellers just waiting to make their exits.

Support and resistance triggers look at these levels as signs of where the market is going. They look at when these lines break. That’s when waiting buyers and sellers reverse their trading plans to go with the trend.

Short-Term Moving Averages

Price movement on stock charts can jump all over. To simplify it, there’s another tool called the moving average.

  When you look at a stock’s moving average, its trajectory can become more apparent. And when you plan for a swing trade, that’s what you need.

What Are the Best Indicators for Swing Trading?

Support and resistance indicators form the bedrock of stock charting. Trading patterns rely on these indicators to predict future moves. If you’re swing trading, you’re looking at these levels even more closely.

Support and resistance can also be applied across a sector. When you’re pinning your trade hopes on a trend, this can give you some more data points.

Real-Life Example of a Swing Trading Strategy

Technical analysis can only get you so far. Treat these indicators as signs of potential trades. When enough of the signs come together, you might want to pull the trigger.

As for swing trading strategies, I’ll give you one of my all-time favorite afternoon patterns. This one often turns into a good swing trading opportunity.

The Late-Day, VWAP-Hold, HOD-Break With News at or Around 52-Week Highs

I LOVE this pattern. Think of it as the afternoon complement to a ‘dip and rip,’ one of my other favorite patterns.

It has a few key ingredients that can signal growth as the trading day comes to a close. If it doesn’t flop, a stock fitting this pattern can potentially roll overnight.

Here’s what to look for…

Promising Signs

Ideally, you want your target stock to have a lot going for it. That means ideally it’s in a hot sector, riding real news, and hitting its 52-week high. 

Nope, this isn’t your typical sketchy stock that might fail without any notice. Its momentum is based on things that the market values.

Stocks in hot sectors have a lot of eyes on them and can also benefit from sympathy plays.

Ideally, you’re looking for news that can deliver sustained value. I’m not just talking about the small bump a stock might get from a “buy” recommendation from a mid-tier analyst. I’m talking about new contracts and positive earnings reports. Maybe even approval for a vaccine.

Last, you want the stock to be hitting its previous resistance point … so you can be there for a potential rally.

Early Spike

You want to see some action in the stock before you trade. This is like when people put in small bids on an eBay sale. You know they’re sniffing around and will bid more if the price is right.

Afternoon HOD Break and VWAP Hold

Here’s where the chart delivers on its promise.

Usually around 2 p.m. Eastern or later, a stock fitting this pattern should hit the high of the day. 

There’s one more thing I like to see here too. I want it to hold the VWAP. Then I might be a believer.

VWAP stands for volume-weighted average price. It’s a popular indicator that will show you the average price at which recent traders bought the stock. 

When the stock’s price is above VWAP, people are making money. And that’s a good mood-setter for a breakout.

How Do You Choose a Stock for Swing Trading?

You can run scans for the pattern I just gave you, or base your ideas on a piece of news or a hot sector. It really depends on how you trade and what your risk tolerance is.

A medium- or large-cap stock might be better for a less active trader. Maybe you target a mega-cap stock that still has a lot of potential, like Tesla (NASDAQ: TSLA). Or maybe a trend like pot stocks or electric vehicles that still has room to grow.

Which Moving Average Is Best for Swing Trading?

Different moving averages can tell you different things. When you’re trading a trend, it’s wise to consider all the factors that might come into play.

A long-term moving average like the 200-day is one of the most popular for showing a stock’s trend over the past year. Traders look at 20-days and ten-days to show a stock’s past month.

You never want to be caught off guard by a trend. This goes double for when you’re not keeping a close eye on the market. 

Mix and match these indicators and find out what works best for you.

Which Time Frame Is Best for Swing Trading?

This again is a matter of preference.

You need to figure out the strategies that work for you and how consistently you can be tracking the market. And these considerations have to be reflected in your trading plan.

How to Improve Your Swing Trading Strategies

Maybe you’ve been swing trading for a few weeks or months … and it’s not working.

This happens a lot, throughout all kinds of trading. And a lot of the time the cause is the same.

What’s the cure? Going back to basics. Reviewing your trading journal. Recommitting to studying. Slowing down your trading until you’re back on track.

Tips for Managing Risk in Swing Trading

Swing trading can be a little riskier than day trading. Even if you’re just trading overnight, you’re exposing yourself to price moves at a time when it’s harder to trade. And you’ve gotta sleep sometime too.

But there are a few things you can do to possibly cut down on this risk.

Stick to Your Trading Plan

Having a good trading plan is one of the biggest pieces of effective swing trading. Sticking to it is the hard part.

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.

That’s why your trading plan should have a defined stop that you don’t change halfway through.

Don’t ignore this stop. That’s how you prevent small losses from becoming large ones.

Trade Small

Every trade has risk. One of the ways you limit this risk is to trade small.

One of the biggest rules for being a consistent trader is to never risk the health of your account on a trade. Even if it looks like a can’t-miss. Some traders won’t risk more than 1% of their account on a single trade.

That type of small gain should be what you’re going for anyway. Slow and steady wins the race, but you’re not even racing. The market will be there tomorrow.

Listen to Feedback

If your trades aren’t working, you might need to change something in your approach.

It might be your stock picks or your screen time. You might need to study more.

Take losses as opportunities to become a better trader. Reviewing your trades can help you find the root of the problem.

What Are the Best Tools and Instruments for Swing Trading?

Every trader needs a powerful platform like StocksToTrade. This is the platform that I use every day.

StocksToTrade has the screening muscle to help you pick out promising stocks. It comes loaded with awesome charting capabilities and a wide-ranging news feed that can key you into news catalysts. And it comes equipped with all the tools you’ll need to implement your swing trading strategies.

You can try it now —get your 14-day trial for just  $7.

How Do You Master Swing Trading?

Swing trading strategies are like any other trading strategy.

If you’re swing trading forex or something similar, you might need to know about geopolitics. When you swing trade stocks, your trading knowledge is key.

 While your trading knowledge is growing, you learn how to read patterns. You should start getting a sense of where and how a stock can move. And you should test your strategies and see them working in the way you planned.

This is a big one — get your own ideas on stocks. Don’t just copy off other traders’ watchlists. Here’s how you can build your own watchlist.

That’s not to say that you shouldn’t listen to other traders. Not at all. You just need to listen to them longer than it takes to get a stock tip.

I think every trader should find an awesome community — like the SteadyTrade Team. We share strategies and push each other to get better. Mike “Huddie” Hudson and I mentor new members to help them build their skills.

That’s really how you become a master — you learn from people who’ve been there before.

Conclusion: Is Swing Trading Right for You?

I can’t tell you if swing trading is right for you. Ask yourself what you want out of trading…

Do you want to be an active trader, but not one who follows the market all day? Swing trading might be a good compromise.

I do know one thing: You won’t know if swing trading works for you unless you try.

How will you try these swing trading strategies? Let me know what you think in the comments!