Forex Trading

Swing Trade Definition

By 13 Mayıs 2021Şubat 25th, 2023No Comments

successful swing trading

Swing trading often results in short to medium hold periods. Profit per transaction is higher than day trading but lower than trend trading. Day traders execute short and long trades to capitalize on intraday market price action, which result from temporary supply and demand inefficiencies.

risk management

However, they all start with that Fibonacci retracement level. The market often pulls back slightly as a reaction and then continues to go higher. This is the type of continuation gap that longer-term traders love to take advantage of, as it writes out the overall prevailing trend. Instead, it is necessary to monitor company news and filter for news such as stock split announcements.

Pyramiding is a reference to adding more and more positions in a particular direction. Swing traders are looking to take advantage of big moves, so it makes no sense to take your profits right away if you can avoid that. 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. Many trading books are available, but it’s best to stick with books written by traders with proven track records.


It’s necessary to keep a list of stocks and ETFs to monitor daily and become familiar with the price action of selected candidates. As for swing trading strategies, I’ll give you one of my all-time favorite afternoon patterns. You are looking for a relatively flat exponential moving average that tells you when the market is consolidating.

Gap and Go Swing Trading Strategy

The degree of certainty is lower and volatility is higher, which presents golden opportunities for swing trading. With a good strategy and proper risk management, swing trading can be profitable. Swing trading is an almost fundamentalist trading style wherein positions are held beyond a single day. It sits somewhere in the middle of the continuum between day trading and trend trading. This method is one of the most common strategies used in swing trading. trading is contingent on market conditions, though there are different trades for every market type. Samantha Silberstein is a Certified Financial Planner, FINRA Series 7 and 63 licensed holder, State of California life, accident, and health insurance licensed agent, and CFA. She spends her days working with hundreds of employees from non-profit and higher education organizations on their personal financial plans. Swing trading tries to identify entry and exit points into a security on the basis of its intra-week or intra-month oscillations, between cycles of optimism and pessimism. Swing traders also have access to a margin or leverage of 50%. This means that if the trader is approved for margin trading, they only need to put up $25,000 in capital for a trade with a current value of $50,000, for example.

Swing trading, like day trading, involves using trends to improve stock portfolios and their value in a short period of time. Day traders make dozens of trades in a single day, never holding on to trades overnight. Swing traders, on the other hand, typically hold onto trades for days to several weeks or months. Swing traders may use a Fibonacci retracement indicator to identify potential reversals, support, and resistance levels, as well as place stop-loss orders and set target prices.

Where have you heard about swing trading?

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. The big risk with swing trading is that the trader has mis-read the near-term price movements and find themselves on the wrong side of events. Swing trading has the advantage of requiring less time than day trading.

Far too many traders are stuck to their computer screens trying to make a living every day. The available strategies range from trend following and market timing strategies to stock picking and asset allocation models for equities, bonds, forex and commodities. You are on the right side of the market, and eventually, people need to start selling their stock that is now losing money, only to accelerate the market in your favor again. As with any other trading option, swing trading has its share of advantages and disadvantages.


Regardless of what you do, by all means, do not risk a large amount of your account and make sure that you are not playing with the money you need to survive on. Jesse Livermore used to say that he doesn’t sell a stock that he owns unless there’s a reason to be short of it. Trading like this means being very patient, but this one trade could have been a bulk of your gains for the year, eliminating many broken trades in the process. It means that you are looking at an area that could be an interesting place to play a reversal candle. Traders all over the world use Fibonacci retracement tools to find a level to get involved in the market.

Although carries risks, it is required for successful swing trading, as traders need to be able to capitalize on opportunities. The goal is to take advantage of a portion of the anticipated price movement to make a profit and then look for the next position. The first rule to successful swing investing is to identify the right stocks. To do this, it’s beneficial to learn how to scan stocks for swing trading and understand which factors drive market movements. It’s also useful to figure out how to ascertain optimal entry and exit points. So the best swing trading candidates are the most actively traded stocks that tend to swing within broad, visible channels.

If good opportunities can be identified, and losses can be minimized with successful stop loss techniques, swing trading can be profitable. If the market is strong, you can wait for the channel line to be hit. If it’s weak, grab your first profit while it’s still there. An experienced trader may shift his tactics and hold a little longer, perhaps until the day when the market fails to make a new high. A beginning trader is better advised to take profits after the channel line has been hit as it’s important to learn to take profits in accordance with one’s trading plan.

Should You Swing Trade Options?

What you are looking to do is buy support on the lower side and sell or short several times at resistance. You need to take advantage of these consolidation frames because they happen all the time. Risks in swing trading are commensurate with market speculation in general. Risk of loss in swing trading typically increases in a trading range, or sideways price movement, as compared to a bull market or bear market that is clearly moving in a specific direction. As the trading opportunities are short term, the price gaps can alter overnight putting the trader at some amount of risk. Moving average convergence divergence , which was established in 1979.

Support and resistance levels are vital for interpreting chart patterns, identifying trend direction, and entry and exit points. It will present the reader with various swing trading strategies, rules to abide by, when to buy and sell, how to limit losses, as well as the pros and cons of using this trading method. Swing trading can be a profitable and accessible way for an investor to get into trading. However, compared to standard stock or ETF investing, the relative complexity involved with a swing trading strategy is not well-suited for amateur investors. Swing traders should select their candidates from the most actively traded stocks and ETFs that show a tendency to swing within broad, well-defined channels.

  • Swing trading strategies primarily employ the use of technical analysis, which attempts to predict future price movements from an investment security’s historical activity.
  • Swing traders focus on short-to-medium term positions while day traders close out their positions at the end of each trading day.
  • As for swing trading strategies, I’ll give you one of my all-time favorite afternoon patterns.
  • Traders need to understand the companies they are trading, why other investors are valuing them above or below the average price, and what information might change investor sentiment.
  • Our scanner is one of the most versatile scanners that can be customized to fit your trading strategy and discipline.

This shows a significant break of support and can lead to a nice swing trade on the short side for large-cap stocks. Remember, many traders will simply place trades based upon earnings reports and nothing else. This is where the fundamental and institutional traders typically establish their positions, moving the market much more than you will. So by following the herd, you can find yourself much more profitable. For the swing trader, which by its very definition means that you are paying attention to the trend, continuation gaps are one of the favorite ways to play the market.

Rebecca Baldridge, CFA, is an investment professional and financial writer with more than twenty years of experience in the financial services industry. She is a founding partner in Quartet Communications, a financial communications and content creation firm. Our experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our partners; however, our opinions are our own.

The price breaking out of a trading channel to the upside indicates a possible price rally, i.e., the trader should go long. On the other hand, a price break below the bottom of the channel suggests that more selling could be on the way, signaling an exit or a shorting opportunity. This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action.

Which Time Frame Is Best for Swing Trading?

I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team. Visit to learn more about selling option premium and receive $400 worth of free training material. However, as stated previously, buying options has a very low probability of profit.

Volatile, making big 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.

As we already discussed, swing traders usually opt for technical analysis as the trading positions chosen are short term, but they may also conduct a fundamental analysis. Using both technical and fundamental analysis would be a better option as it allows a more thorough and accurate analysis. For those who practice risk management, it can be a profitable endeavor. But those who don’t treat it like a business and instead treat trading more like gambling tend to have ongoing losses.

Is a process of buying and selling stocks for short durations, usually a few days to a couple of weeks. As mentioned, other methods can be used to profit from the market’s short-term swings. A basic EMA crossover system can be used by focusing on the nine-, 13- and 50-period EMAs.

The candlestick confirms that the support held, and the swing trader will start to buy there. You can see that we often go higher afterward, although if there was a 50% pullback in the process. 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. 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. 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.