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Swing Trading Strategy: A Beginner’s Guide

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Written by Timothy Sykes
Updated 9/16/2023 11 min read

There are different strategies for all types of trader — swing trading strategy is valued for its performance over longer time frames and chart ranges. This trading style aims to capture the ‘swings’ within the trend of a financial instrument or asset, be it a stock, a commodity, or a currency pair.

Swing trading is a blend of fundamental and technical analysis that seeks to take advantage of short-term price directions and momentum. It’s a strategy that requires patience, discipline, and a deep understanding of chart patterns. But don’t worry, whether you’re a novice trader or someone looking to diversify your trading style, this guide will walk you through the ins and outs of swing trades.

From understanding what swing trading is, its benefits, how to develop a swing trading strategy, to the key differences between swing trading and day trading, we’ve got you covered. We’ll also delve into some practical tips and examples for beginners, key considerations when building a strategy, and how technical analysis tools work.

There’s a LOT of information to cover — let’s get to it!

What is Swing Trading?

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Swing trading is a style of trading that attempts to capture gains in a stock (or any financial instrument) over a period of a few days to several weeks. Swing traders primarily use technical analysis to look for trading opportunities. These traders may utilize fundamental analysis in addition to analyzing price trends and patterns.

Swing trading is NOT the same as passive investing. The goal of swing trading is to identify the overall trend and then capture gains by trading in that trend. Technical analysis is often used to identify signals of trends and placement of trading goals and risk.

This approach is just one of many in the trading world. For instance, day trading is another popular method, which you can learn more about in this comprehensive guide on Day Trading Strategy. Each strategy has its unique benefits and challenges, so it’s crucial to understand them fully before diving in.

Benefits of Swing Trading

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Swing trading offers several benefits over other trading styles. These include the potential for significant profits, a reduced time commitment, and the ability to trade in all market conditions.

One of the primary benefits of swing trading is the potential to make substantial profits. Because swing traders hold positions for several days to weeks, they can capture gains that are typically larger than those that day traders can achieve.

Another benefit of swing trading is that it requires less time than day trading. Swing traders can spend a few hours each week analyzing the market and placing trades, rather than needing to monitor the market continuously throughout the day.

There are a lot of different ways to build a swing trading strategy. One of my favorites is weekend swing trading.

Check out my Weekend Profits program to learn more about this powerful strategy!

Developing a Swing Trading Strategy

Developing a successful swing trading strategy involves several steps, from choosing your time frame to identifying support and resistance levels, analyzing the daily chart, and more.

It’s not just about identifying trends and making trades; it’s also about understanding the market’s ebbs and flows. One way to enhance your understanding is by learning about other trading strategies. For instance, Reversal Trading Strategy can provide valuable insights into market reversals, which can be beneficial for swing trading. By diversifying your knowledge, you can develop a more robust and versatile trading strategy.

Choosing Your Time Frame

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The first step in developing a swing trading strategy is to choose your time frame. This will depend on your personal trading style and availability. Some swing traders prefer to trade on a daily time frame, while others may prefer a weekly or monthly time frame.

Identifying Support and Resistance Levels

Support and resistance levels are crucial in swing trading. They represent the price levels at which a stock has historically had difficulty moving beyond. Identifying these levels can help you determine where to enter and exit trades.

I use StocksToTrade to scan for support levels — its algorithmic Oracle Support and Resistance Levels indicator helps me identify these levels in a flash! I helped design it to target the type of quick-changing data that traders rely on…

It has the trading indicators, dynamic charts, and stock screening capabilities that traders like me look for in a platform. It also has a selection of add-on alerts services, so you can stay ahead of the curve.

Grab your 14-day StocksToTrade trial today — it’s only $7!

Analyzing the Daily Chart

Analyzing the daily chart is a crucial part of swing trading. This involves looking at the stock’s price movements over the past several days to identify trends and patterns that could indicate future price movements.

Using Technical Analysis Tools

Technical analysis tools can be incredibly useful in swing trading. These tools can help you identify trends, determine support and resistance levels, and predict future price movements. Some of the most commonly used technical analysis tools in swing trading include trend lines, moving averages, and oscillators.

Swing Trading vs. Day Trading

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While swing trading and day trading are two popular trading styles, they have several key differences. Understanding these differences is crucial for choosing the right approach for your trading goals.

Another trading strategy to consider is the Gap Trading Strategy, which focuses on price gaps in the market. By exploring different strategies, you can gain a broader perspective on trading and find the approach that best suits your style and goals.

Key Differences Between Swing Trading and Day Trading

One of the main differences between swing trading and day trading is the time frame. Day traders typically buy and sell stocks within a single day, while swing traders hold positions for several days to weeks.

Another key difference is the amount of time required. Day trading is a full-time job that requires constant monitoring of the market, while swing trading can be done with less time commitment.

Finally, the two trading styles also differ in terms of risk and potential returns. Day trading can provide consistent returns and allows for more control over risk, while swing trading can offer larger potential returns but also comes with higher potential risk.

How to Start Swing Trading

Starting swing trading involves several steps, from setting up a trading account to learning how to analyze the market.

Setting Up a Trading Account

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The first step to start swing trading is to set up a trading account. This involves choosing a broker, opening an account, and funding it. It’s important to choose a broker that offers a reliable trading platform, competitive fees, and strong customer support.

Learning to Analyze the Market

Learning to analyze the market is a crucial part of swing trading. This involves understanding how to read price charts, identify trends, and use technical analysis tools. There are many resources available online, including articles, tutorials, and courses, that can help you learn these skills.

Developing a Trading Plan

Developing a trading plan is a crucial step in becoming a successful swing trader. Your trading plan should outline your goals, risk tolerance, and specific trading strategies. It should also include rules for when to enter and exit trades, how much to invest in each trade, and how to manage your risk.

Practicing Your Strategy

Before you start trading with real money, it’s a good idea to practice your strategy using a demo account. This allows you to gain experience and make mistakes without risking real money. Once you’re comfortable with your strategy and have seen consistent results in your demo account, you can start trading with real money.

Swing Trading Tips for Beginners

If you’re new to swing trading, here are a few tips to help you get started.

Start Small

When you’re first starting out, it’s a good idea to start small. This can help you manage your risk and gain experience without risking too much money.

Use Stop Losses

Stop losses are a crucial tool in swing trading. They can help you limit your losses if a trade goes against you. It’s a good idea to set a stop loss for every trade you make.

I use manual stop losses for stocks I trade. The reason for this? I work with signs of price movement — Level II data for example — not just the results after the fact.

Stay Disciplined

Discipline is key in swing trading. It’s important to stick to your trading plan and not let emotions drive your trading decisions. This can help you avoid common trading mistakes like chasing losses or holding onto losing trades for too long.

Keep Learning

The financial markets are constantly changing, and it’s important to keep learning and adapting your strategy. This can involve reading books, taking courses, or following financial news and analysis.

Key Takeaways

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Swing trading is a popular trading style that involves holding positions for several days to weeks. It offers several benefits, including the potential for significant profits and a reduced time commitment compared to day trading.

However, swing trading strategies also come with risks, and require a good understanding of technical analysis and stock market trends. It’s important to develop a solid trading plan, use risk management tools like stop losses, and stay disciplined in your trading.

It isn’t a silver bullet for your trading plan — but swing trading is one of many techniques you should learn as part of your trading education!

Trading isn’t rocket science. It’s a skill you build and work on like any other. Trading has changed my life, and I think this way of life should be open to more people…

I’ve built my Trading Challenge to pass on the things I had to learn for myself. It’s the kind of community that I wish I had when I was starting out.

We don’t accept everyone. If you’re up for the challenge — I want to hear from you.

Apply to the Trading Challenge here.

Trading is a battlefield. The more knowledge you have, the better prepared you’ll be.

Have you tried swing trading? Let me know in the comments — I love hearing from my readers!

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Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”