The trend is your buddy up until the very end, when it begins to bend. How many of you have been exposed to this quotation before? Don’t worry if you haven’t heard of swing trading if you are one of the people who has already heard of it; if you are one of the people who hasn’t heard of it, we are confident that they have already heard of swing trading as well. We are going to decipher it for you.
To begin, swing trading is a trading method that enables us to collect short- to medium-term profits over a period of a few weeks in any stock or financial instrument. These gains may be captured by swing trading any stock or financial instrument. The majority of the time, swing traders rely on technical analysis to choose stocks for their swing trading portfolios.
But wait! Day trading and swing trading are two very different types of trading. The holding period is what differentiates day trading from swing trading as the primary difference between the two. Yes! In day trading, open positions are terminated before the end of the trading day, however in swing trading, open positions may be carried forward and kept for anywhere between a few weeks and a month.
Assuming that you are familiar with the concept of swing trading, the following is a rundown of the five most important considerations each trader should keep in mind while engaging in swing trading:
As was just said, trading in the direction of the trend is an example of swing trading. Swing traders should pay attention to a variety of technical tools, such as the breakout from a range, chart patterns, significant resistance and support zones, and reverse candlestick patterns.
For instance, one can see a double Bottom formation in the weekly chart below of Tata Motors Ltd. after a downward trend in the price of the company’s stock. A chart pattern known as a double bottom is considered a bullish reversal pattern since it signals that a stock’s price may go upward.
After the breakout from the double bottom chart formation, traders have the opportunity to join the market for swing trading and remain in it until the price target of the pattern is reached or the current trend comes to an end, as seen in the chart that is shown above.
However, it is important to keep in mind that investors should only join the trading after the breakout has been validated by the volume, as seen in the chart that can be found above. Therefore, swing traders want to keep an eye out for breakouts in the equities they trade before initiating a position in such stocks.
When it comes to choosing stocks for swing trading, volume is of the utmost importance. All right, let’s talk about this:
Swing traders rely heavily on volume since it provides them with the information necessary to assess the power of a developing trend. The primary reason for this is because a trend that is accompanied by high volume will be more powerful than one that is accompanied by low volume. In addition, having a greater number of traders either purchase or sell provides a stronger foundation for the price movement.
The chart that you just looked at demonstrates that volume is most effective when used as part of a breakout strategy. Breakouts, on the other hand, are more likely to occur after a period of consolidation or a chart pattern that is often accompanied by low volume; volume tends to rise when a breakout really occurs. When doing research on the volume of trades in a stock, investors may also employ volume indicators.
When engaging in swing trading, one of the most fundamental guidelines is that traders should only trade liquid equities. The daily minimum that you choose is, of course, completely arbitrary; nevertheless, the example of 500,000 shares each day is the most instructive.
This is because it is possible to sell equities with high liquidity rapidly and with a reduced chance of incurring a loss as a result of the bid-ask spread. The bid-ask spread tends to be smaller for equities that trade at higher volumes. It is important to keep in mind that one of the primary tenets of swing trading is discipline, and that detecting a poor transaction or possible loss demands discipline. Therefore, swing traders have the ability to swiftly quit a deal when the stocks they are trading are liquid.
Strength in Relation to Others
When engaging in swing trading, it is important to choose companies that are doing substantially better than either the sector or the index. With the assistance of this metric, we are better able to determine which asset classes or securities on the market are the most robust and which are the most vulnerable. In general, the stocks that exhibit robust or feeble RS performance over a certain time period have a tendency to continue moving upward.
When picking equities for use in swing trading, volatility is one of the most important considerations. Volatility is a useful tool for determining how much movement to expect in stock prices. Traders may determine the degree of the stock’s volatility via the use of volatility indicators such as Bollinger bands or ATR. Swing traders should focus their trading activity on equities that have a high degree of volatility. Large price movements are caused by volatile equities, which also provide a decent trading window for placing stops and taking gains.
Finding stocks suitable for swing trading with the help of StockEdge Strategies
As can be seen in the following table, StockEdge provides traders with both bullish and bearish swing trading methods that are ready to use.
Traders will get a list of stocks that they may use to establish a position for swing trading after clicking on any one of the tactics described above. The following stocks are included on this list:
Swing Trading Webinars 1. Finding the Right Swing Trading Strategy, presented by Vishal Mehta
The market is considered to be trending around twenty percent of the time, while the remaining eighty percent of the time it is considered to be range-bound. As a result, given the range-bound nature of the market, we need to decide on several swing trading tactics. You will be able to demonstrate numerous methods for generating revenue with the assistance of Vishal Mehta’s webinar titled “Finding the Right Swing Trading Strategy.”
Golden Swing, by Souradeep Dey, which Breaks New Ground
Due to obligations associated to their jobs, many individuals are unable to concentrate on the market throughout the whole of the market’s open hours. As a result, they demand an effective swing trading strategy that has a high percentage of success and generates fewer but more precise deals.
Traders will be able to learn about the Golden Swing set up with the assistance of Souradeep Dey’s webinar, which is titled “Path-Breaking Golden Swing.” This is a trading strategy in which an investor may only receive 2-4 trades in a specific stock in the Daily time frame in any given year.
As the holding period for swing trade stocks is longer than that of day trade stocks, there is a greater potential for loss associated with this type of trading. Although we have covered how to pick stocks for swing trading, it is important to note that this type of trading is riskier than day trading. Therefore, it would be beneficial for you to also have a decent method for detecting trading chances and possible warning signs in the market.
Traders also need to bear in mind that the tactics discussed in the previous section of this article are not the only possible solutions to the problems they face. Every trader has to design a strategy that is tailored to their own approach to the market. Traders should not depend on the advice of others on swing trading. We hope that you found this blog to be interesting and that you will apply its lessons to the fullest extent possible in the real world. Share this blog with your loved ones and assist us in achieving our goal of increasing people’s awareness of the need of sound financial management by showing some love.