10 Approaches To Swing Trading
Studies show that the global algorithmic (algo) trading market is expected to grow to $18.8 billion by 2024.
Trading can be a profitable way to make money, but it’s important to use the right strategies.
Many people lose money in the futures market and stock market because they don’t use the right trading strategies. This is usually down to inexperience, or not knowing the best strategies to use.
But there’s no need to worry. Keep reading because we’ve put together a list of 10 swing trading strategies that you should know about. These are simple and easy-to-use strategies that will help you make money in the markets.
Trading can be a profitable way to make money, but it’s important to use the right strategies.
Many people lose money in the futures market and stock market because they don’t use the right trading strategies. This is usually down to inexperience, or not knowing the best strategies to use.
But there’s no need to worry. Keep reading because we’ve put together a list of 10 swing trading strategies that you should know about. These are simple and easy-to-use strategies that will help you make money in the markets.
What Is Swing Trading?
Swing trading is a popular form of active trading that attempts to take advantage of short-term (usually 1-10 days) price movements in a stock or other security. By timing their trades carefully, swing traders hope to capture gains for days or weeks. In this regard, it is different from day trading, another popular way to trade.
While this type of trading can be profitable, it also carries a higher degree of risk than buy-and-hold strategies. For this reason, swing traders must be very diligent in their analysis of the markets and have a clear understanding of the risks involved.
Those who are new to swing trading should consider paper trading first to gain experience before putting any real money at stake. Many excellent books can help you on the fast track to Algo trading success, check them out here.
Swing traders can take a bullish or bearish stance, depending on their market outlook. Some swing trade professionals also use technical analysis to look for specific patterns that might indicate when security is about to make a move.
Technical analysis can be used to pinpoint support and resistance levels, as well as trends. By using technical analysis, swing traders can make more informed decisions about when to enter and exit a trade.
While swing trading can be profitable, it is important to remember that it is not without risk. Prices can move quickly, and swings can be sharp.
This means that losses can mount quickly if a trade goes against the trader. Swing trading is not for everyone, and it is important to understand the risks involved before getting started.
While this type of trading can be profitable, it also carries a higher degree of risk than buy-and-hold strategies. For this reason, swing traders must be very diligent in their analysis of the markets and have a clear understanding of the risks involved.
Those who are new to swing trading should consider paper trading first to gain experience before putting any real money at stake. Many excellent books can help you on the fast track to Algo trading success, check them out here.
Swing traders can take a bullish or bearish stance, depending on their market outlook. Some swing trade professionals also use technical analysis to look for specific patterns that might indicate when security is about to make a move.
Technical analysis can be used to pinpoint support and resistance levels, as well as trends. By using technical analysis, swing traders can make more informed decisions about when to enter and exit a trade.
While swing trading can be profitable, it is important to remember that it is not without risk. Prices can move quickly, and swings can be sharp.
This means that losses can mount quickly if a trade goes against the trader. Swing trading is not for everyone, and it is important to understand the risks involved before getting started.
Top 10 Swing Trading Strategies And Strategy Ideas
Now that you know a little bit about swing trading, let’s take a look at some of the most popular swing trading strategies. Here are our top 10 swing trading ideas. REMEMBER, properly test these ideas before you start trading with them!
1. Stick to the Major Trend
When you are swing trading, it is important to pay attention to the overall trend of the market. You don’t want to be caught in a trade going against the overall market trend. The best way to do this is to use a market scanner to quickly identify stocks that are moving in the same direction as the overall market.
This will help you avoid getting caught in a trade that is going against the grain and will also help you identify potential trading opportunities.
In addition, you should also keep an eye on economic indicators and news events that could impact the overall market trend. By paying attention to these factors, you can help ensure that you are always trading in line with the current market conditions.
2. Use Support and Resistance Levels
Many traders use technical analysis to find potential entry and exit points for their trades. One of the most common tools used in technical analysis is support and resistance levels. These levels are created by drawing horizontal lines on a chart, and they can help to indicate where the price of an asset is likely to find support or resistance. In general, the longer the line, the more significant the level is.
Support and resistance levels can be used as entry points for trades, or as exits when the price has reached a certain level. However, it is important to remember that these levels are not exact and that prices can sometimes break through them. As a result, it is always important to use other indicators, in addition, to support and resistance levels when making trading decisions.
3. Use Moving Averages
Moving averages are a popular technical indicator that can help you smooth out the price action and better understand the underlying trend. There are many different types of moving averages, so it’s important to experiment to find which one works best for you. Some common types of moving averages include simple moving averages, adaptive moving averages, exponential moving averages, and weighted moving averages.
Each type of moving average has its strengths and weaknesses, so it’s important to test out different averages to see which one works best for your trading strategy. In general, moving averages are a valuable tool for any trader who wants to get a better handle on the market trend.
1. Stick to the Major Trend
When you are swing trading, it is important to pay attention to the overall trend of the market. You don’t want to be caught in a trade going against the overall market trend. The best way to do this is to use a market scanner to quickly identify stocks that are moving in the same direction as the overall market.
This will help you avoid getting caught in a trade that is going against the grain and will also help you identify potential trading opportunities.
In addition, you should also keep an eye on economic indicators and news events that could impact the overall market trend. By paying attention to these factors, you can help ensure that you are always trading in line with the current market conditions.
2. Use Support and Resistance Levels
Many traders use technical analysis to find potential entry and exit points for their trades. One of the most common tools used in technical analysis is support and resistance levels. These levels are created by drawing horizontal lines on a chart, and they can help to indicate where the price of an asset is likely to find support or resistance. In general, the longer the line, the more significant the level is.
Support and resistance levels can be used as entry points for trades, or as exits when the price has reached a certain level. However, it is important to remember that these levels are not exact and that prices can sometimes break through them. As a result, it is always important to use other indicators, in addition, to support and resistance levels when making trading decisions.
3. Use Moving Averages
Moving averages are a popular technical indicator that can help you smooth out the price action and better understand the underlying trend. There are many different types of moving averages, so it’s important to experiment to find which one works best for you. Some common types of moving averages include simple moving averages, adaptive moving averages, exponential moving averages, and weighted moving averages.
Each type of moving average has its strengths and weaknesses, so it’s important to test out different averages to see which one works best for your trading strategy. In general, moving averages are a valuable tool for any trader who wants to get a better handle on the market trend.
4. Incorporate Fibonacci Retracements
Fibonacci retracements are popular among traders and investors as a way to predict potential support and resistance levels. These levels are based on Fibonacci ratios, which are derived from a sequence of numbers first discovered by Italian mathematician Leonardo Fibonacci in the 13th century.
The most common Fibonacci ratios used in trading are 23.6%, 38.2%, 50%, 61.8%, and 100%. These ratios can be used to find entry and exit points for trades, as well as to set stop-loss and take-profit orders. Fibonacci retracements can also be used in conjunction with other technical indicators to confirm potential support and resistance levels.
While Fibonacci retracements are a popular tool among traders, it’s important to remember that they are not exact and that prices can sometimes move outside of the expected levels.
5. Use Candlestick Charting
One of the most popular technical indicators is the candlestick chart. Candlesticks provide a wealth of information about market sentiment and potential reversals. For example, the Doji is a candlestick pattern that indicates indecision among traders. The hammer and inverted hammer patterns can also help identify the best trade setups.
By understanding and using candlestick charts, you can gain a significant edge in the markets.
6. Look for Divergences
In the world of technical analysis, a divergence occurs when the price action of an asset diverges from an indicator such as the RSI or MACD. Divergences can be used as a leading indicator of a potential trend reversal, and they are often watched closely by traders.
There are two types of divergences: bullish divergences, which occur when the price is hitting higher highs but the indicator is falling off with lower highs; and bearish divergences, which occur when the price is moving down with lower lows but the indicator is experiencing higher lows. Divergences can be tricky to spot, but they can be a valuable tool for traders who know how to use them.
7. Stay Disciplined With Your Trading Plan
Many new traders jump into the market without a clear plan or understanding of the risks involved. This often leads to losses, as they do not have a solid method for managing their trades. A trading plan helps to counter this by outlining specific entry and exit criteria. This gives traders a framework to base their decisions on and helps to keep emotions out of the equation.
Furthermore, a good trading plan will also include a risk management strategy. This ensures that trades are only taken with a pre-determined amount of risk, limiting potential losses. By following a solid trading plan, traders can increase their chances of success in the market.
8. Manage Your Risk
When it comes to swing trading, risk management is essential. You don’t want to risk more than 1-2% of your account on any one trade. By following this rule, you’ll ensure that your losses are small and manageable. Additionally, you’ll be able to stay in the market even if there are a few losing trades in a row. This is because your overall account value won’t take a big hit, and you’ll still have enough capital to keep trading.
Of course, risk management isn’t the only important aspect of swing trading. You also need to have a solid strategy and select stocks carefully. However, if you can master risk management, you’ll be well on your way to success in the markets.
9. Use Stop Losses
A stop loss is an order that you place with your broker to sell a stock if it reaches a certain price. This price is typically below the current market price and is used to limit your losses if the stock falls sharply. There are several advantages to using a stop loss. First, it helps to protect your capital by limiting your downside risk. Second, it can help to lock in profits if the stock price falls and you can sell at your stop-loss price.
Finally, a stop loss can help to ease your anxiety about a stock by giving you a predefined exit point. However, there are also some drawbacks to using a stop loss. If stocks do not fall sharply, you may miss out on potential gains
10. Take Profits When They Are Available
Any experienced trader will tell you that one of the most difficult lessons to learn is when to take profits. It can be tempting to hold on to a winning position in the hopes of making even more money, but this can often lead to losses. The market can turn against you quickly, so it’s important to take your profits when they are available. Many swing traders make the mistake of holding on to their winners for too long, but if you are disciplined, you can set strict profit targets and stick to them.
This will help you lock in your gains and prevent losses. So don’t be afraid to take profits when they are available - it’s one of the key ingredients to success as a trader.
Just to repeat: The key with any of these ideas is to TEST them!
Fibonacci retracements are popular among traders and investors as a way to predict potential support and resistance levels. These levels are based on Fibonacci ratios, which are derived from a sequence of numbers first discovered by Italian mathematician Leonardo Fibonacci in the 13th century.
The most common Fibonacci ratios used in trading are 23.6%, 38.2%, 50%, 61.8%, and 100%. These ratios can be used to find entry and exit points for trades, as well as to set stop-loss and take-profit orders. Fibonacci retracements can also be used in conjunction with other technical indicators to confirm potential support and resistance levels.
While Fibonacci retracements are a popular tool among traders, it’s important to remember that they are not exact and that prices can sometimes move outside of the expected levels.
5. Use Candlestick Charting
One of the most popular technical indicators is the candlestick chart. Candlesticks provide a wealth of information about market sentiment and potential reversals. For example, the Doji is a candlestick pattern that indicates indecision among traders. The hammer and inverted hammer patterns can also help identify the best trade setups.
By understanding and using candlestick charts, you can gain a significant edge in the markets.
6. Look for Divergences
In the world of technical analysis, a divergence occurs when the price action of an asset diverges from an indicator such as the RSI or MACD. Divergences can be used as a leading indicator of a potential trend reversal, and they are often watched closely by traders.
There are two types of divergences: bullish divergences, which occur when the price is hitting higher highs but the indicator is falling off with lower highs; and bearish divergences, which occur when the price is moving down with lower lows but the indicator is experiencing higher lows. Divergences can be tricky to spot, but they can be a valuable tool for traders who know how to use them.
7. Stay Disciplined With Your Trading Plan
Many new traders jump into the market without a clear plan or understanding of the risks involved. This often leads to losses, as they do not have a solid method for managing their trades. A trading plan helps to counter this by outlining specific entry and exit criteria. This gives traders a framework to base their decisions on and helps to keep emotions out of the equation.
Furthermore, a good trading plan will also include a risk management strategy. This ensures that trades are only taken with a pre-determined amount of risk, limiting potential losses. By following a solid trading plan, traders can increase their chances of success in the market.
8. Manage Your Risk
When it comes to swing trading, risk management is essential. You don’t want to risk more than 1-2% of your account on any one trade. By following this rule, you’ll ensure that your losses are small and manageable. Additionally, you’ll be able to stay in the market even if there are a few losing trades in a row. This is because your overall account value won’t take a big hit, and you’ll still have enough capital to keep trading.
Of course, risk management isn’t the only important aspect of swing trading. You also need to have a solid strategy and select stocks carefully. However, if you can master risk management, you’ll be well on your way to success in the markets.
9. Use Stop Losses
A stop loss is an order that you place with your broker to sell a stock if it reaches a certain price. This price is typically below the current market price and is used to limit your losses if the stock falls sharply. There are several advantages to using a stop loss. First, it helps to protect your capital by limiting your downside risk. Second, it can help to lock in profits if the stock price falls and you can sell at your stop-loss price.
Finally, a stop loss can help to ease your anxiety about a stock by giving you a predefined exit point. However, there are also some drawbacks to using a stop loss. If stocks do not fall sharply, you may miss out on potential gains
10. Take Profits When They Are Available
Any experienced trader will tell you that one of the most difficult lessons to learn is when to take profits. It can be tempting to hold on to a winning position in the hopes of making even more money, but this can often lead to losses. The market can turn against you quickly, so it’s important to take your profits when they are available. Many swing traders make the mistake of holding on to their winners for too long, but if you are disciplined, you can set strict profit targets and stick to them.
This will help you lock in your gains and prevent losses. So don’t be afraid to take profits when they are available - it’s one of the key ingredients to success as a trader.
Just to repeat: The key with any of these ideas is to TEST them!
How to Choose the Best Swing Trading Strategy for You
Now that we’ve covered some of the most popular swing trading strategies, it’s time to choose the best one for you. There are a few factors to consider when making this decision.
First, you need to make sure that the strategy fits your personality. If you’re not comfortable with taking risks, then a more conservative strategy is likely to be a better fit.
On the other hand, if you’re willing to take on more risk for the chance of higher rewards, then a more aggressive strategy may be right for you.
Second, you need to consider your financial goals. Are you looking to generate income from your trading, or are you aiming to grow your account quickly? Depending on your goals, different strategies may be more suitable.
Finally, you need to consider your time frame. If you’re only able to trade for a few hours each day, then a shorter-term strategy is likely to be a better fit.
However, if you have more time to devote to trading, then a longer-term strategy may be more appropriate. Ultimately, the best swing trading strategy for you is the one that suits your personality, goals, and time frame.
By taking all of these factors into account, you’ll be well on your way to finding the perfect strategy for you. Alternatively, check out our workshop to see if you are building and trading proven Algo trading strategies.
First, you need to make sure that the strategy fits your personality. If you’re not comfortable with taking risks, then a more conservative strategy is likely to be a better fit.
On the other hand, if you’re willing to take on more risk for the chance of higher rewards, then a more aggressive strategy may be right for you.
Second, you need to consider your financial goals. Are you looking to generate income from your trading, or are you aiming to grow your account quickly? Depending on your goals, different strategies may be more suitable.
Finally, you need to consider your time frame. If you’re only able to trade for a few hours each day, then a shorter-term strategy is likely to be a better fit.
However, if you have more time to devote to trading, then a longer-term strategy may be more appropriate. Ultimately, the best swing trading strategy for you is the one that suits your personality, goals, and time frame.
By taking all of these factors into account, you’ll be well on your way to finding the perfect strategy for you. Alternatively, check out our workshop to see if you are building and trading proven Algo trading strategies.
Implement These Swing Trading Strategies Today
That’s it for now! You should have a general understanding of swing trading and the different strategies involved. Remember, always do your research before investing in any strategy, and never invest more than you can afford to lose.
Are there any other swing trading strategies that you would like us to cover? Let us know in the comments below!
For more great content on how to build award-winning Algo trading systems, be sure to check out my other trading articles.
Are there any other swing trading strategies that you would like us to cover? Let us know in the comments below!
For more great content on how to build award-winning Algo trading systems, be sure to check out my other trading articles.
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About The Author: Kevin Davey is an award winning private futures, forex and commodities trader. He has been trading for over 25 years.Three consecutive years, Kevin achieved over 100% annual returns in a real time, real money, year long trading contest, finishing in first or second place each of those years.
Kevin is the author of 5 highly acclaimed books, including "Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading" (Wiley 2014). Kevin provides a wealth of trading information at his website: https://www.kjtradingsystems.com
Copyright, Kevin Davey and KJ Trading Systems. All Rights Reserved. Reprint of above article is permitted, as long as the About The Author information is included.
Kevin is the author of 5 highly acclaimed books, including "Building Algorithmic Trading Systems: A Trader's Journey From Data Mining to Monte Carlo Simulation to Live Trading" (Wiley 2014). Kevin provides a wealth of trading information at his website: https://www.kjtradingsystems.com
Copyright, Kevin Davey and KJ Trading Systems. All Rights Reserved. Reprint of above article is permitted, as long as the About The Author information is included.