How to Find Stocks to Swing Trade: A Definitive Guide on Swing Trading

By April 25, 2019trading

How can you find stocks to trade? That’s THE universal trading question. And ultimately, it depends on what you’re looking for in a trade.

For example, a day trader might look for low-priced stocks with big price fluctuations. A buy-and-hold investor might watch for moderately priced stocks with the potential for long-term growth.

But what about a trading style that’s somewhere in the middle … like swing trading? With its moderate time frame and focus on trends, swing trading requires different techniques for whittling down your watchlist than other types of trading.

Read on to learn all about swing trading: what it is, its benefits, and how to find stocks when you’re exploring this trading style.

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What Is Swing Trading?

Before we go any further, let’s start with the basics: What is swing trading?

Swing trading can be a happy medium between day trading and position trading. It’s a specific trading method where you hold the stocks for a short yet unspecified amount of time. So you might hold a position overnight or even as long as a few months.

It’s less about the time period and more about trying to milk a trend. A swing trader’s goal is to hold the stock long enough to try to profit from price swings. And that’s, incidentally, where this trading style gets its name.

Swing Trading vs. Day Trading

Swing trading has some similarities to day trading, but one notable difference might be the timeline. Swing trading is generally short term, but it doesn’t adhere to a specific timeline. Day trading, on the other hand, does.

A day trade is defined as a trade where you both enter and exit your position within the same trading day. That means you buy after the market opens and sell before it closes. The trade may last a few seconds or several hours — but it won’t be more than a day.

That’s not the only difference, though. Day traders and swing traders approach trends differently.

With day trading, a long-term trend doesn’t matter as much as short-term fluctuations. A day trade catalyst might be a juicy piece of news pertaining to the stock or the sector.

With swing trading, traders take a slightly longer view of the trend in play. They’re more interested in the company’s fundamentals as well as the strength and potential duration of a trend when researching a stock.

Let’s say a day trader and a swing trader are both looking for stocks within a hot sector …

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A day trader might enter a trade based on a news release about a specific company, aim for profits, and exit the trade the same day.

A swing trader, on the other hand, might look for stocks based on news with greater and longer-term effects on the sector. But that news might not necessarily cause huge movements within a single day.

Advantages of Swing Trading

Is swing trading right for you? Consider some of the perks that come with this style of trading:

A slower pace than day trading. The supersonic speeds of day trading aren’t for all traders. Swing trading can move a bit slower — just enough that new traders can get involved without feeling overwhelmed.

That’s not to say swing trading is totally free and easy. You still need to stay on top of your trades, ready to respond to stock price movements. But the pace can be less hectic than day trading.

The opportunity to create strong trading plans. With swing trading, you have a little more time to devote to research and plotting out a strong trading plan. It can be a great way for new traders to establish good habits.

Swing trading requires that you set deliberate entry and exit points and that you carefully monitor the stock’s performance. You want to make sure a stock performs according to your original thesis that got you into the trade.

It’s a fairly low-maintenance approach, but it’s not so relaxed that you’ll lose interest or get lazy about monitoring stocks, which can sometimes happen with longer holds.

Swing Trading Strategies

Curious about some of the specific strategies and tools swing traders might use? Here’s an overview of some common ones:

Using Bollinger Bands®

bollinger bands on stock chart

The lines around the candlesticks are Bollinger Bands

Bollinger Bands® are a popular technical indicator with swing traders. They’re a duo of lines that represent positive and negative standard deviations from the SMA (that’s the simple moving average) of the stock’s price.  

When you look at Bollinger Bands® overlaid on a stock chart, you can begin to see some information about potential trends.

The idea is that if a stock’s trend is strong, its movement will approach the upper band. If it’s weak, or weakening, it may approach the bottom band.

It’s not always an absolute truth, of course, but the bands can offer a suggestion of the trend’s strength.

Watch the RSI

relative strength index on stock chart

Chipotle Mexican Grill stock shows RSI at extreme levels (source: StocksToTrade)

The RSI (short for relative strength index) is a super popular indicator that can help traders gauge the strength of a trend by measuring its gains and losses to see which way the momentum is swinging.

When you take a quick look at a stock’s performance, it can seem like it’s all over the place. The RSI can help you make sense of gains and losses, measuring them against each other within certain time periods to help you see the dominant movements.

RSI is shown as a number between 0 and 100. Usually, 30 and 70 are the ‘magic’ numbers that traders look to as indications of oversold or overbought conditions. By combining the RSI with Bollinger Bands®, swing traders can gain more confidence about the trend’s direction.

Golden Cross

It might sound like an artifact from “The Da Vinci Code,” but the golden cross is actually a type of candlestick pattern. With the golden cross, a short-term moving average crosses the level of a long-term moving average.

The long-term indicator is the slow, plodding movement — but the short-term movement can be seen as a sign of bullish movement in the near future, especially when paired with unusually high volume.

Support and Resistance Strategies

Support and resistance plotted on stock chart

Bars showing support and resistance on Sirius XM stock chart

As a swing trader, working with support and resistance levels can help you refine your entry and exit points.

The breakout strategy, for example, is where traders try to take a position in a stock before it breaks resistance levels. The big hope is that it will explode, and traders want to ride the momentum.

In pursuing this strategy, a trader must set a sound entry point. The aim is to be ahead of the curve and get a favorable price. So think not just about resistance but also support when timing an entry.

Using support and resistance strategies aren’t just a matter of looking at the chart and saying “yay” or “nay” though. Traders should also use indicators to confirm trends, check out the company’s fundamentals, and follow the news.

Take Advantage of StocksToTrade Features

There are so many stocks to choose from that traders can become overwhelmed super fast. Decision fatigue is real! And there can be points where, as a trader, you just want to buy something, anything.

Don’t fall into this trap! A great stock screener can you help streamline your research and assist you in creating a strong watchlist. With StocksToTrade, you’ve got a one-stop-shop screener, with plenty of technical analysis tools, news links, and broker integration. You can execute trades right from the platform!  

Why not let StocksToTrade help you with some of the heavy lifting? That way you can focus on your research and building smart trading plans.

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Like any other type of trading, swing trading tends to suit those who are willing to do thorough research.

Because swing trading involves longer holds than scalping or day trading, it’s key to do your research on the stock and the potential of an uptrend. This includes not just using technical indicators but doing thorough fundamental research as well.

Swing trading might not be as stressful as day trading, but don’t let that be an excuse to be lax in your approach. Take the time to collect data, then use it to craft detailed trading plans.

And remember: Your trading plan is only as valuable as your commitment to stick to it.  

How does swing trading play into your overall market approach? How do you find stocks to trade as a swing trader? Leave a comment and let me know!

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