If you trade in the market, you’re either a trader or an investor. However, in this day and age and with the technology available to traders, you can also be both. Aside from buying and holding stocks long-term, there are many different ways to gain excellent profits in the short term, and traders do so with swing trading. This article will cover the ins and outs of swing trading and guide traders on operating and growing as traders by providing specific tools and techniques that can help you lock in regular profits.

Swing Trading Definition

Financial experts define swing trading as buying and selling quickly, a few days to a few months. The meaning of swing trading may differ among individual traders based on their experiences and preferences. But, It typically involves holding overnight positions to cash out when there are adequate profits to take. Each trader needs to establish their trading parameters and set their trading discipline to work. 

Day Trading vs. Swing Trading

The difference between swing trading vs. day trading is the time frame. Day traders buy and sell intraday within one trading session and can last a few minutes to a few hours. Swing traders buy one day and sell another day, ranging from a few days to a few months; it depends on the trader’s strategy. However, traders should understand that the best stocks for day trading are not necessarily the best for swing trading and vice versa. Similarly, the weekly pivot points for swing trading stocks might not be as important to a day trader paying closer attention to intraday levels and volume.

Common Swing Trading Techniques

A top trading strategy is to play the highs and lows of the past two weeks. The 50-day moving average gives clues as to how well the stock performs compared with recent weeks. The 50-day simple moving average can also indicate support or low levels versus resistance or high levels.

Technical analysis charts that display daily closing prices and volume help traders formulate ideas on entry and exit points. The chart below shows the tech sector ETF, QQQ, with the 50-period simple moving average. When QQQ‘s price falls below the 50-period SMA, the trend might change from bullish to bearish because the price is lower than the previous 50 candlesticks.

You must be aware of a good volume for swing trading to avoid getting trapped in a low-volume stock. Low-volume stocks can be volatile, making big price jumps quickly or move very little and be hard to exit at a reasonable price. The best stock indicators for swing trading are support and resistance levels on technical charts. That means buying long at support levels, selling or shorting into resistance levels, and covering at support levels are what traders should strive for when swing trading.

Overnight swing trading can be very profitable since wide price swings are expected during the open and close. Many traders play the last hour of a trading session because that’s when big financial institutions buy stocks. Similarly, trading volume is usually at its peak during the first couple of hours of regular trading, creating great potential stock moves in the morning. There are many swing momentum trading opportunities during these busy periods.

Technical vs. Fundamental Analysis

Although many swing traders focus mainly on technical and fundamental analysis, the most popular trading strategies are built on technical charts. The best charts for swing trading are candlestick charts, which reveal opening and closing prices with daily highs and lows. The best swing trading stocks are high volume stocks (several million shares traded per day) with an identifiable trend and a signal that the trend will continue, like the chart below.

The chart above shows a 50-period SMA stock in a clear uptrend with significant daily volume. This could be a good candidate for a swing trade higher. 

Playing News-driven Stocks

Traders should use caution when trading based on the news. Stocks often spike up for a few days on good news, then quickly or gradually pull back for a period after that. These pullbacks can be played as short sales or indicators that set up low entry points. How a cycle plays out is unique for each stock, based on many factors. It’s unnecessary to know why a stock moves up, down, or sideways. What matters more is your technical analysis and risk management strategies.

Entry and Exit Planning

The best swing trading strategies are based on chart setups and predetermined entry and exit points. Discipline is critical in trading. In other words, the trader must already know the entrance and exit points before executing the trade. It’s imperative not to fall into the mindset of an emotional cheerleader or panic. Getting too emotional can cause you to lose track of your plan, which is to look for a market signal, get in, make profits, then get out before the move reverses.

Swing traders must be prepared to sell when market signals point to sustained weakness at a gain or loss. If the price falls below your stop loss level, you must get out before the loss gets worse. This strategy works much better than waiting around for the price to come back, which can take weeks or months, assuming it even happens. The thinking behind this strategy is that your winning trades will make up for the losers. You won’t exhaust your whole account if you keep losses minimized. 

Some Simpler Trading traders prefer to use the -2 ATR band as an exit strategy. They close their long trade when the stock closes below the -2 ATR band. Another method to know when to close a trade is watching the moving averages. For example, when the shorter-period EMA crosses below the longer EMA, they close their long trade because the trend is changing.

Testing Swing Trading Strategies

Robinhood swing trading has helped popularize online trading with younger participants, as the brokerage platform makes trading easy and free. But before jumping into trading, it’s a good idea to test your theories with paper trading. That means pretending to trade while not risking real money. One of the swing trading strategies Reddit traders have elevated to public consciousness revolves around meme stocks, which in 2021 were led by GameStop (GME) and AMC Entertainment (AMC). At Simpler Trading, we don’t suggest you jump on meme stocks unless there’s a solid technical setup. During the big GME and AMC moves in 2021, traders had technical setups to participate in but always wait for a setup. Meme stocks can spike high, but they always come back down. You don’t want to be the last to jump on the bandwagon and get stuck in a significant loss. 

Scalping vs. swing trading

Is scalping any different than swing stock trading? Both strategies operate on the principle of short-term profits. The main difference is scalping involves settling for small gains, such as $5-10 profit per trade, while making multiple other trades within a short time frame. Ideally, small gains offset small losses while the small gains add up to a nice overall profit. Typically, scalping trades are much shorter term than swing trades.

One way to scalp and swing trade simultaneously is to enter multiple positions at the end of a trading day and then close out trades the following day. This is an excellent tactic for some traders to use in the market. If you have a small account, the swing trading strategy avoids the pattern day trading rule because you’re holding trades overnight. If you don’t have a cash account or the cash value does not equal at least $25,000 in your margin account, you’re only allowed to make three-day trades during a five-day rolling period per the day trading rules set by FINRA.

Best Market Resources

Many stock-picking resources are available on the internet, but why go anywhere else when we have some of the best professional traders with Simpler Trading? If you are more of an investor than a trader, Simpler Trading offers a program operated by one of the most successful educators in the market. And that is none other than Mary Ellen McGonagle with her MEM Edge report. However, suppose you are looking for free and quick. In that case, Investors Business Daily has excellent investing and trading resources. Or, if you are looking for a powerful free scanner, then finviz is a great resource. Below you will find the best options and stock-picking services that we provide. 

• Best for small accounts – John Carters, Small Account Mastery Program; mentors traders three times a month who trades with John Carter himself. He shows you his strategies and setups and how he picks his stocks and trades them with options. 
• Best for stock trading – TG Watkins, Moxie Indicator™ Mastery; traders get monthly live trading sessions with TG Watkins and Real-time trade alerts where his goal is to execute entry and exit points without wasting time.
• Best for ETF options – Raghee Horner’s Sector Secrets Mastery; traders get access to ongoing guidance from Raghee to identify ETFs and Individual stocks trade setups. 
• Best for Day Trading getting around the PDT rule – Allison Ostrander’s Profit Recycling Mastery; traders get to trade with Allison on a weekly basis where she shows traders what she’s trading in real-time. 
• Best for day trading futures and small account futures – Joe Rokop’s Strike Zone Mastery; traders looking to trade with a professional that day trades in futures and learn to spot entry signals to catch the big moves. 
• Best for precise options trades – Henry and David’s Voodoo Mastery Program; with this unique program, you benefit from two minds at work mentoring traders by helping them discover the science and art using Voodoo Lines to “map out the market.”
• Best for options trading – Taylor Horton’s, Compounding Growth Mastery; focuses on trading options, but trading with a professional can teach their options strategy designed to grow an account over time can help traders in any capacity. 
• Best to find high-quality stocks – Simpler Trading Scanner; this scanner is designed to find exactly what you are looking for in the market. Any trader with any strategy can use a premium scanner to find the best trades out there. 

Best Swing Trading YouTube channels

Simpler Trading has many avenues where traders can learn and grow as a trader. Of course, we have a lot of great premium content, but if you are new to trading and don’t know where to start, Simpler Trading has you covered. Below we will list what we offer in terms of great content you can apply in your trading venture.  

• Simpler Trading YouTube Channel
• Simpler Trading Blog
• Simpler Insights Daily Newsletter
• Focused Trades With Taylor Horton
• Profit Pilot With TG Watkins

Books on Trading

Many trading books are available, but it’s best to stick with books written by traders with proven track records. Someone who makes a ton of cash at trading typically doesn’t just write books about it; they live it and stand by their words. Our traders can demonstrate publicly in real-time what they’ve done to gain their profits. However, beware of the books on traders you have never heard of or those with a get-rich-quick approach, as you should know there isn’t a quick way to get rich.

You need general knowledge about trading and risk management as a base, but you also need to develop your ideas about the best setups. So use swing trading books to help establish a basic knowledge of sensible trading strategies.

Best trading books to read:  

• Mastering the Trade byJohn F. Carter 
• Understanding Options by Michael Sincere
• Trading in the Zone by Michael Douglas
• Technical Analysis and Stock Market Profits by Richard W. Schabacker
• How I Made $2,000,000 in the Stock Market by Nicolas Darvas

Useful Stock Screeners

There are plenty of websites and apps that offer free swing trading screeners. The Finviz stock screening app is excellent for researching short-squeeze candidates. The Finviz screener for swing trading allows you to monitor a list of stocks for free. You’ll be able to quickly review stock prices, volume, and other important financial metrics like market cap and earnings per share.

Some of the best Finviz screener settings for swing trading include short float and shares outstanding, along with comparing average volume with the current volume. Short interest is another powerful metric for both long and short sellers to gauge which oversold stocks are ready to squeeze upward from heavy short covering. Ultimately, the best Finviz settings for swing trading are your personal preferences.

One of the best premium scanners that traders can get on the market is the Simpler Trading Scanner. Our scanner is one of the most versatile scanners that can be customized to fit your trading strategy and discipline. For instance, it can help find the most up-to-date squeeze and identify high or low-volume stocks. So, if you are in the market for a premium scanner that caters to your style, the Simpler Trading Scanner is one to consider.

Other Trading Tools

Advanced trading platforms typically offer a tool that allows you to set a trailing stop for swing trading. Using a stop-loss order is a risk management strategy for limiting losses. When the stock drops to the low price level you set, it automatically sells the stock. A trailing stop is similar, except it dumps the stock if it falls by a certain percentage you choose.

There are a lot of free indicators out there that can help you in your technical analysis. One example of a free indicator is the moving average convergence divergence (MACD), which was established in 1979. It’s a histogram system that compares different moving averages to evaluate momentum strength or weakness. When the moving averages cross paths on the chart, it’s an indicator of a change in price momentum. MACD settings have three digits for several past trading days in parentheses, such as the standard: (12, 26, 9). The best MACD settings for swing trading depend on your trading style and market conditions.

One of the best free indicators on the market is the TTM_Squeeze; it’s an indicator that can help traders find explosive moves within the market. The TTM-Squeeze can reveal stocks under market pressure getting ready to rise or fall rapidly, and the best part about it is that it’s free for traders to use.

Swing Trading Crypto

Swing trading cryptocurrency such as Bitcoin (BTC) is high-risk for any type of trader. The prices can fluctuate within a day, just as the broad price range has been extremely wide the past few years. On some days, the spread between high and low prices might be several thousand dollars. So it’s important for traders who engage in Bitcoin swing trading to be prepared for a fast-moving roller-coaster ride through extreme volatility.

The best approach to swing trading crypto partly involves technical analysis. Still, it’s also very news-driven, particularly when the Federal Reserve or financial professionals comment on crypto. On several occasions, Tesla CEO Elon Musk has moved crypto prices sharply up through his tweets about Tesla on Twitter. He even helped Dogecoin (DOGE), which started as a joke, rally in 2021, so when trading crypto, consider that external noise can cause volatility.

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FAQs on Swing Trading