Swing trading is a trading method that endeavors to acquire gains from stocks within a specific period, ranging from days to as long as weeks. Simply put, a trader looks for one single move or swing all while observing the market to exit trade before potential pressure surfaces.
The premise of swing trading is to keep trades for a longer period of time; longer than a single day which commonly extends up to weeks. However, this definition supersedes what swing trading actually is. In reality, swing trading encompasses day trading and trend trading as swing traders have the opportunity to keep a stock in specific timespan (days to weeks) as they place position heavily dependent on its intra-week oscillations.
CHOOSING A VIABLE SWING TRADING STOCKS
One of the most crucial factors to secure success in swing trading is the type of swing trading stocks one will choose. As this is the case, largely capitalized stocks are a viable pick as it is considered the most common and active stocks traded in prominent exchanges. In a market setting, large cap stocks have high probability of swinging simultaneously between highs and lows as swing traders follow a particular price movement for days only to switch for its counterpart once the price reverses.
UTILIZING SWING TRADING STRATEGIES
Below are some of swing trading strategies that are guaranteed to clock in exponential success in swing trading. Though there are many ways to execute swing trading, the strategies below are proven and tested.
- BREAKOUTS– This kind of swing trading technique takes advantage of the early minutes of an uptrend when it comes to placing a trade. Once a stock hit a certain level of movement and volatility all while breaking against crucial points of support or resistance, it is ideal to place a trade.
- BREAKDOWNS– This is known to be the counterpart of breakout technique whereas the premise of this is the opposite of the latter. Once the stock price approaches under a specific level of support, it is ideal to place a trade.
- SWING HIGH AND SWING LOW- This swing trading technique reveals crucial market information. A swing high’s formation is confirmed just when a third high is made after two consecutive lower highs. More so, a swing low is confirmed when a price moves lower after two consecutive higher lows.
A swing trader might want to note that closing a trade neutral enough to upper or lower channel without much accuracy is crucial. Being too precise might bring much risks like losing a potential opportunity to trade. In pressing market with stocks showing a persistent directional trend, it is important for swing traders to wait the channel line to be reached before taking profit.
Swing trading came to be an ideal trading style that suits newbie traders. In line, it also provides profit possibility for novice traders. It allows traders to clock in adequate returns after days of monitoring and trading in swings. However, swing trading is only convenient for those traders who know how to capture weekly and monthly market trends.