How to start swing trading stocks today 2022

How to start swing trading stocks today 2022

It happens that by opening a position intraday, the trader gets into an emerging trend and watches the profit accumulate as it develops. In this case, at the end of the day, there is a picture that gives a high potential for trend continuation and indicates the advisability of leaving position overnight. Traditional short-term trading methods require mandatory closing at the end of the session, which minimizes the risk, but also reduces the potential profit. However, there is a style of trading that combines both intraday and overnight trades - swing trading. Swing trading stocks is something in between intraday trading and position trading.

In this article, we will find out what swing trading is and what strategies can be used.

Swing trading stocks definition

Swing trading is based on the fluctuation theory outlined in the 1950s by G. Douglas Taylor in his book on swing trading, as a strategy for trading and profiting from repetitive 3-day rate changes. Swing trading looks only at trends and price patterns, not interested in the intrinsic value of assets. Swing trading is based primarily on technical analysis.

Trading in the framework of the swing trading system implies holding positions open for some time - usually during the working week (up to 5 days). Swing trading requires patience and is not suitable for everyone, but the profits are potentially higher than those that can be obtained using other trading styles.

Swing trading within a single week usually uses a 4-hour time frame. This trading style is more suitable for those who are ready to devote only a part of their time to trading, i.e. traders who have other main job. Swing trading stocks on high time frames implies the use of daily charts and time frames with long periods. Unfortunately, the longer you keep a trade open, the more risk you are exposed to.

When swing trading on long-term time frames, unexpected economic news can cause the market to go against you and your account. For example, after the Swiss National Bank canceled the franc's peg to the euro, many long-term traders suffered huge losses in a matter of hours.

We advise using swing trading when trading within a week, as:

it is the golden mean between active and less active trading;

It allows you to diversify your capital by spreading it over several trades per week and to take advantage of current trading opportunities without tying up all your money and without tying you to your computer at the same time.

For all its similarities to intraday trading, low risk, and short-term goals, swing trading stocks has two strong advantages:

  • maximizing profits if the trader manages to hit a trend that develops over several days or weeks;
  • time to prepare for the next trading session by making assumptions about the possible development of this or that swing scenario and outlining a plan of action.

Planning a trade is 90% of the success in implementing a swing technique, so the first thing a trader needs to do is create a trading plan.

How to start swing trading stocks

Now, after we have learned what stocks swing trading is, you might be wondering how you can get started. If you are a beginner, the first thing you need to take care of is to choose a broker and then the platform for trading. Here are some aspects for you to pay attention to:

Use the best swing trading stocks broker

Since we are talking about investing real money, you must be 100% sure that the broker of choice fully meets your requirements. When choosing a broker, many people prioritize low commissions or the choice of assets, but first of all, you should think about the safety of your own funds.

If it is not clear to you why accreditation from a leading financial institution is so important, here are just some of the benefits:

  • Funds are kept in segregated accounts;
  • The broker strictly observes anti-money laundering measures, so the identity of each client is verified;
  • The licensing organization constantly audits the trading platform to ensure that traders are as safe as possible.

As for the deposits, wire transfers are available in almost all cases, but the transaction may take up to 2 business days. If you do not want to wait, you should choose a trading platform with multiple deposit methods - in this case, the payment will reach your account instantly.

On the AdroFx platform, payments are accepted not only by wire transfer but also via e-wallets and Bitcoin, which is even more convenient and faster.

It is preferable to use platforms, where support is provided online (in the special chat room) or by telephone.

In short, there are hundreds of trading platforms to choose from. With that in mind, you need to do some research to make sure you find a broker that meets your needs.

Use the best swing trading stocks trading platform

Today on the Internet there are many trading terminals, each of which has its advantages and disadvantages. It is difficult to say which trading platform is better for trading because it is everyone's personal choice. Much depends on the goals and personal preferences of the trader.

Below are listed the most popular platforms (the rating is based on the number of active users):

  • Metatrader 4;
  • MIRROR Trader;
  • NINJA Trader;
  • cTRADER.

These platforms have been actively used by traders around the world for many years, so they can be safely called the best. It is important to understand that each program for trading has its pros and cons, with which it is better to get acquainted individually.

So, which trading platform to choose? It is difficult to give a definite answer on which forex trading platform is better. Everyone has to determine the best variant for himself, proceeding from his own goals and wishes. It is safe to say that the best trading platform is the one that is the most comfortable for you to work with. If you are specifically interested in a platform for trading all kinds of assets, then pay attention to the terminal MetaTrader. You can download a trading platform over here.

Swing trading stocks strategies

There are many opportunities to create profitable stocks swing trading strategy. The bottom line here is to identify a strong, long enough price movement in time and join the ride on an eleventh-hour attempt.

Below we will consider several such strategies based on different instruments of technical analysis (price action, Harami patterns, indicators). They are quite reliable techniques, but you should not take them as a recommendation for action and use them without careful preliminary analysis and reflection. After all, as you know, the technical analysis contains a lot of subjectivity, and its methods should be used wisely, if possible, trying to assess the conclusions based on them with an extremely critical eye.

Swing trading stocks using price action

This trading system is very different from the others. It allows the trader to assume the market movement based only on the price chart, which gives him an undeniable advantage.

To succeed with this strategy, you will have to gain solid experience and determine for yourself which Price Action pattern patterns work better and which ones work worse in your opinion.

Traders can trade the market taking into account all of the economic events that are already happening in the world. The advantage here is that the trader frees his mind from unnecessary information and has a clear view of what is happening in the stock market.

The Price Action strategy is attracting more and more practicing traders and investors for three reasons:

  • It is universal.
  • It is relatively simple.
  • It is very popular.

First, it should be noted that this method is effective in long-term trading, where the main time frame is D1. The advantage of such a chart is that it filters out unnecessary market noise in the form of chaotic price fluctuations. Another advantage of long-term trading - traders spend less time analyzing the market, sometimes 15 minutes of work with the chart during the day is enough.

Trading by the Price Action strategy implies a rejection of indicators, trading advisors, and any other "assistants". The assumption of further market movement is based on how the price of the asset behaves now.

Working signals in the system are so-called candlestick patterns - periodically repeated figures called sets or price action patterns.

These figures appear because of the constantly repeating situations on the market. The mood of market participants is consistent with these behavioral patterns allowing predicting the price movement by this method.

It is enough for traders using this method to perfect two or three effective signals for stable profitable trading. The only thing needed is the ability to track the appearance of such patterns.

Price action swing trading on stocks: The harami pattern

Harami is a candlestick pattern that often appears at the end of a trend. Accordingly, it refers to a reversal pattern and gives the trader the opportunity to enter a new direction before it develops. Like with many other candlestick patterns, the market entry will be even earlier than the classic signals in scalping strategies, such as Ross's hooks or the 123 pattern. That is why the Harami candlestick pattern is quite popular, and many traders use it and have convincing statistics of the signal working out. But it should be noted immediately that this is true only when trading on high time frames is implied. That is, even a four-hour chart gives a lot of false signals, not to mention an hour or lower. Therefore, you should consider a daily or at least an eight-hour chart as the main one.

When the Harami appears on the chart, the Japanese candlesticks in the number of two should look as follows:

  • The first candlestick closes in the direction of the trend developing in the market. It usually has a not insignificant body, the shadows should not be large in relation to the size of the body.
  • The next candlestick after it is a reversal candlestick, which means it is already closed against the trend. It has a small body and no long shadow against the previous trend.

The result is a sequence familiar to many people - a rapid last movement and the beginning of the opposite trend. If we switch to small periods, we can usually see that the price has slowed down a sharp movement and started to consolidate in a relatively narrow range. Then either the slope in the opposite direction to the trend may appear, or it may just happen so that the close of a candle of a large period coincides with the phase of the counter-trend movement of a small period. Anyway, the close of the candle is important, and if it turns out against the trend, it's a good signal.

Swing trading stocks using indicators

Technical analysis indicators help traders recognize when a trend is bullish or bearish and how it will behave in the future. Although some swing traders use news and rely on fundamental analysis for their trading, technical indicators are necessary to recognize the best entry and exit points. In general, swing traders use such indicators to form or find the perfect strategy to increase their profits later.

Here are the three most important types of indicators for stocks swing trading:

  • Trend indicators - such indicators show in which direction the market is going to move and how you can characterize the trend.
  • Momentum indicators - these indicators show how strong the trend is now, and whether it can be seen on the horizon reversal. They can also show overbought and oversold levels. The best-known example of a Momentum indicator is the Relative Strength Index (RSI).
  • Volume indicators - one of the most important trading indicators - a volume indicator, which shows how many traders in each time frame buy and sell assets. We have compiled a list of the best swing trading indicators, which stand out for their simplicity and the effectiveness of trading signals.

It's important to mention that none of them will guarantee you consistent profits. Technical indicators do not predict the future, but they can better help you understand the present and the past.

The trading indicators described above can be great aids in finding relevant signals, but they will work even more effectively if you combine them with other tools on the charts, for example, support and resistance lines and candlestick patterns.

Conclusion

Swing trading can be an ideal style for beginners, and indicators can help traders capitalize on price volatility.

However, even though price movements in stocks swing trading are constant, you should not ignore basic risk management. By using Stop-Losses, you can protect your funds.

Some traders may feel that indicators don't work as well as they should. So let us remind you that technical indicators are not designed to fully predict future price movement with 100% probability, but they can help you make the best decision based on an in-depth market analysis.