Swing Trading Strategies
Learn simple swing trading strategies that work!
It’s important that you read our articles, What is Swing Trading and How to Start Swing Trading after tackling swing trading strategies. They will give you context to work within and an overview on swing trading in general.
Now that is out of the way; let’s talk about swing trading strategies.
Before you employ any strategy, you must first find stocks to trade.
Every weekend I pull up my favorite scanners (free resource list here) and begin to filter stocks based on a set of criteria. For example; I will ask the scanner to fetch me stocks that trade over $10, volume of over 1 million, 5-10% off its 52 weeks high, etc.
By doing this; I am defining the parameters for certain stocks that have a better chance of following through.
The Comb Through
Once I have a list of stocks; I proceed to narrow them down even more. I pull up every stock’s chart and begin to identify points of resistance and points of support. At times; I will check to see how far that stock is from its 20 day, 50 day and 200 day moving average. And based on all the above factors; decide if the stock is in play.
At this point, my list will diminish greatly.
Once I’ve completed the comb through, it’s time to see if the stock has any upcoming binary events that can potentially throw a wrench in my trade. As a swing trader; you rarely want to hold stocks through any event that you can’t predict. Take earnings for example, it’s almost impossible to know how traders/investors will react once a stock reports earnings. In my near decade of trading, I have seen stocks sell-off on decent earnings.
Moreover, you want to ensure there isn’t any upcoming economic event/s that can effect the broader markets.
Now that you’ve identified stocks that fit your criteria, you’ve decided that based on the charts they are stocks that are in play. You’ve ensured that the companies do not report earnings in the near future and in addition; there is no economic event that can effect the broader markets; it is time to identify the trend.
Swing Trading Strategy
(Identifying the Trend)
You want to first decide if the stock is trending up or trending down. For stocks that are trending up (characterized by higher lows, and higher highs) these are the best stocks to go long. And the best possible entry for you trade is to buy at support and/or when the stock pulls back.
Conversely; for stocks that are trending down (characterized by lower highs and lower lows) these are the stocks that you want to go short! And the best possible entry for a short is selling at resistance and/or on a “pop”.
It’s also important to address position size and adhere to some form of risk management guidelines. (eg: I will not lose more than 1% of my entire trading capital on any trade and I will not put more than 5-10% of my entire trading capital in any trade).
There are also other swing trading strategies available, such as the Momentum Gap, Rubber Band strategy, Volume Spike strategy and many more. With experience, analysis and trial and error, you can easily determine the best swing trading strategies that can guarantee excellent and effective result.
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