Best Swing Trading Strategies to Become a Successful Trader
Swing Trading, Day Trading, Trend Trading, Scalping; the newbie who hits the financial markets and starts hearing these terminologies is likely to be overwhelmed.
Because if you are reading this article, you are still not clear what are the swing trading strategies.
It is important to know well what this “way” of operating in financial markets consists of. Especially from the requirements necessary to use it. For example,
- the necessary market-knowledge and
- The time to be devoted to markets if you use swing trading strategies.
What is Swing Trading?
Swing Trading is a way to operate on the Stock Market. It seeks to capture a part of a larger trend of a listed asset.
In theory, it is about capturing an apparent price movement, avoiding as far as possible any setbacks that may occur.
Swing Traders are the surfers of the market, always looking for the next wave.
Characteristics that Define Swing Trading
To fully understand what Swing Trading consists of, nothing better than to define its characteristics:
Swing Trading Time Frames
In Swing Trading, operations are open for periods greater than one day. And usually do not last more than a few weeks.
This point can be a bit controversial. Because there will be traders who use daily charts to find their trades. And therefore, they will be open for several days or weeks.
Meanwhile, other traders prefer to use 4-hour charts. Their trades will be open for a few days at most swing trading time frames.
It Operates for and Against the Trend
Swing Trading seeks to operate movements against the established trend. Swing Traders are counter traders.
I will try to clarify this point, which seems very important to me.
- A swing trader will look for reversals in an established trend to trade in favor of the trend. Although it is operating “in favor” of the primary trend, it is operating against the short-term trend.
- But, you can also try to find those short-term moves, turns that occur against the primary trend.
Therefore, it operates both for and against the trend, but always looking for turning points; clean price movements.
Using Technical Analysis
The decisions that Swing Traders make are mainly based on price analysis.
You have to have a good understanding of how the price moves.
To help with decision-making, it is possible to use technical indicators, the action of the price on supports, resistance, and volume. In short, any small indication indicating the possibility of a strong impulse in a specific direction.
To trade using a swing trading strategy, it is necessary to have well-defined stop losses as well as profit stops.
Time Needed to Operate
Another characteristic that defines this way of operating is the time that must be devoted to it.
Other operations, such as Day Trading or Scalping, need a great concentration and be constantly aware of the market. Swing Trading leaves greater freedom to the operator.
If we talk stocks, the Swing Trader makes its decisions at the end of the day or during the weekend. This “quiet” operation makes it possible to make trading compatible with any other professional activity.
The Forex traders have it a little more complicated being a market that is open 05 days a week, 24 hours a day.
In any case, your decisions are based on candle closings of 4 hours or more. So it is not necessary to be glued to the computer screen to trade.
Minimum Capital Required to do Swing Trading
The ideal is to start with an account between $ 500 and $ 2,000. However, many brokers allow you to open minimal accounts of only $ 100.
The reason is straightforward. If you open such a small account, the size of your operation has to be very small. Otherwise, you may not be able to open any process, taking into account the stop loss and the risk assumed.
At this point, I suggest you review the different techniques for managing money.
Best Swing Trading Strategies
To do swing trading with a chance of success, you have to train.
Good training includes-
- Knowledge of technical analysis,
- Trading methods or strategies,
- Emotion management and, of course,
- Good management of the financial statements of the Trading account.
Everyone attaches great importance to trading techniques and strategies, when to enter, and when to exit the market.
It is indeed essential, but what is really important is the management of money. And with time, you will discover that the other most important aspect of trading.
- A good swing trading strategy in the hands of an experienced trader will surely generate a lot of money.
- A good swing trading strategy, in the hands of a beginning trader, is sure to generate losses.
In many cases, the gains will not be allowed to run. In others, the losses will not be cut on time, etc.
How to Build a Swing Trading Strategy
A swing trading strategy has to contemplate everything that is needed to operate successfully: entry, exit, trade size, and risk management.
When and How to Enter the Market
When and how to enter the market is the heart of a swing trading strategy.
Basically, a swing trading strategy is based on defining when there is an opportunity in the market.
In this sense, my preferred strategies have to do with the critical “zones” of the market:
- Supports and resistors
- Trend lines and channels
- Fibonacci levels
When and How to Exit the Market
If the entry is essential, the exit defines the difference between making or losing money on the trade.
There are two ways to exit a trade:
- The price has fulfilled the entire planned route.
- By stop loss or protection of gains.
Usually, in the Swing Trading strategy, profit objectives are defined. For example, you buy on support and sell on resistance.
When the price reaches the zone marked as “critical,” the trader takes profits and forgets the operation.
However, circumstances may arise where you prefer to use a stop chasing price. So, you exit the trade when the move is fully exhausted.
The Size of the Operation
There are many formulas to decide the size of the operations that we put on the market.
Fixed sizes can be used, for example, and if we talk about Forex: a lot.
The advantage of choosing a fixed size is that you don’t have to think much. The downside is in risk management.
Trade size and risk management go hand in hand.
My way of thinking about the size of the operation is by using an “Anti-Martingale.”
The problem is that the risk of ruin is enormous. However, the Anti-Martingale systems preach the opposite, reduce the size of the operation if we enter into losses.
But at the same time, we increase the size of the operation if we are in profit. So we improve and optimize the size of the account.
Loss Stops and Risk Management
As I just told you, the stop loss is closely related to risk management.
Although they could be treated independently, I prefer to use the trade size, depending on where I place the stop loss.
The stop loss always has to be placed where we think the price should not arrive. It allows validating the movement we are observing.
We could say that if the price reaches there, our conclusion was wrong. What we thought was an opportunity; in reality, it was not.
Finishing Words: Swing Trading Strategies
Swing trading strategies require good knowledge of the market. It would help if you had reasonable control over the trading account. But it is no different in this regard from most forms of trading.
What is it different? I think it leaves us enough time to study and decide when to take operation.
It is not as aggressive as Day Trading or Scalping, operations that require a lot, but a lot of emotional control.
For me, Swing Trading is the best way to do trading.