Swing Trading Strategy

KEY TAKEAWAYS

• Swing trading involves taking trades that can last from a couple of days to several months in order to profit from the expected price movement
• Though swing trading is more of a long term strategy, it can be used on the daily charts as well.
• Swing trading is the process of determining where the stock price can move next, entering a position and then making a profit if that move occurs.

What is Swing Trading Strategy

Swing Trading is a long term trading strategy, when trades are kept open from a few days to, sometimes, several weeks. Swing trading strategy’s essence is taking advantage of market big fluctuations "swings". Fundamental analysis plays an important role on longer timeframes. But before we start, if you are new to Forex trading, you can start with the basics, “What is Forex”.

Strong directional moves are often triggered by important or unexpected market news, such as corporate income statements or central bank meetings, which means swing traders need to be aware of market fundamentals. There are ways to develop a reliable trading plan. Here are the most common swing trading techniques we’d like to share with you.

Though swing trading is more of a long term strategy, it can be used on the daily charts as well.

Positive sides

• Traders using this technique need less time to trade than day trading.
• Simplifies the trading process, since traders can rely only on technical analysis.

Negative sides

• Because traders use swing trading on the daily charts they may often miss the longer-term trends in favor of short-term market moves.
• Sharp market reversals can lead to significant losses.

What is Swing Trading

Swing trading involves taking trades that can last from a couple of days to several months in order to profit from the expected price movement. The goal of swing trading is to find some of the potential price movement. Some traders may be looking for volatile stocks with obvious big moves, while others may prefer quieter stocks.

In both cases, swing trading is the process of determining where the stock price can move next, entering a position and then making a profit if that move occurs.

Swing Trading Strategies That Work

There are ways to develop a reliable trading plan. Here are the most common technical indicators that can be used to help develop swing trading strategies that will work.

Swing Trading Tactics

• Moving average crossovers - When the shorter-term MA crosses above the longer-term MA, it's a buy signal, as it indicates that the trend is shifting up. This is known as a "golden cross."
• Cup-and-handle patterns - A cup and handle is a technical chart pattern that resembles a cup and handle where the cup is in the shape of a "u" and the handle has a slight downward drift. A cup and handle is considered a bullish signal extending an uptrend, and is used to spot opportunities to go long.
• Head and shoulders patterns - A head and shoulders pattern is a technical indicator with a chart pattern described by three peaks, the outside two are close in height and the middle is highest. A head and shoulders pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal.
• Flags - Flags are areas of tight consolidation in price action showing a counter-trend move that follows directly after a sharp directional movement in price. The pattern typically consists of between five and twenty price bars. Flag patterns can be either upward trending (bullish flag) or downward trending (bearish flag).
• Triangles - A triangle is a chart pattern, depicted by drawing trendlines along a converging price range, that connotes a pause in the prevailing trend. Technical analysts categorize triangles as continuation patterns.

The Bottom Line on Swing Trading Strategy

Swing trading is actually one of the best trading styles since it offers significant profit potential for traders. Swing traders receive feedback on their trades after a couple of days which is a good point to keep them on toes and motivated.

Swing trading in a way is in the middle of between day trading to trend trading - trend trading offers greater profit potential if a trader is able to catch a major market trend of weeks or months and stay steady (which is hard) and day trading - trading dozens of stocks per day, is exhausting. Swing trading is kind of a smart mixture of two.