The Ultimate Guide to Swing Trading Strategies

Everything About Swing Trading Strategies

Swing trading strategies involve leveraging significant stock market events and conducting sector analysis to find trading opportunities. In addition, swing traders conduct extensive research during the pre-market and after-market hours, studying market positions and price movements. 

Aware of the overnight risk of swing trading, traders indulge in taking calculative risks to capture gains. They look for profits utilizing an established risk/reward ratio based on a stop loss and profit target. As there’s much more to it than mainstream buys trade and sell trade, here’s all you need to know about swing trading:

What is Swing Trading?

When a trader relies on multi-day chart patterns to target short-term gains based on the most recent upward/downward price trends, it’s called swing trading. The stocks (or other securities) are ideally held for a few weeks or several days in this trading style.

As compared to day trading and trend trading, swing trading falls in the center of these two extreme trading styles. 

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Understanding a Swing Trade

Usually, positions are held for a duration exceeding a single trading session in a swing trade. However, it may not surpass a time frame of a month or two when it’s time to trade the stocks. Fundamental and technical analysis is involved in a swing trade as the swing traders aim to overcome market volatility. 

Why’s it called ‘Swing’ Trading?

Unlike other trading styles, swing trading consists of identifying an entry point and exit point through hourly, daily and weekly chart patterns. The trend directions and movements depict swinging positions, and hence, this trading strategy is popularly known as ‘swing’ trading.  

Also read: 20 Stock market terms for beginners

What’s the Best Example of Swing Trading? 

Apple Swing Trading

The aforementioned chart represents Apple’s stock movement on the higher side. A cup and handle pattern is spotted during the uptrend, hinting at a further upward price trend once a position higher than the handle is achieved.

  • It’s an ideal buying point above the handle around the $192.80 price mark.
  • A stop-loss is recommended near the $187.60 mark, as shown via a rectangle.
  • The approximate trading risk stands at $5.20, i.e. the entry point minus the stop-loss point.

For capturing gains equaling double the risk amount, i.e. twice of $5.20 over the buying point ($192.80), the ideal selling point would be anything over $203.20.

Now let’s focus on the new price low of around $216, which is another profitable exit option. This entire swing trade had spanned for about two months. 

Which are the Best Indicators for Swing Trading?

The best swing trading indicators are hourly, daily or weekly moving averages, market sentiment, candlestick patterns, technical indicators and chart patterns.

Quick Read: 15 Forex Indicators That Every Trader Should Know

Which Securities Should a Swing Trader Prefer?

Swing traders can capture gains from different types of securities. However, the most preferred ones are large-cap stocks. Because of being highly active in terms of trading, large-cap stocks come with a broader scope of showing upper and downward movements.

Typically, a swing trading strategy follows a consistent direction of the wave until the stock changes its direction.

The Goal of a Swing Trading Strategy

A swing trader aims to grasp the foundation of ongoing trends and score greater profits within short to medium time intervals. The key is to make the most of a swing trading indicator that best suits the market scenario.

The ultimate goal is to play the waiting game for just the right period of time until an appropriate exit point is reached. Moreover, there’s also an imperative swing trading objective to avoid letting the commission and trading charges affect the profit margins.

5 Must Know Swing Trading Strategies

1. Studying the Fibonacci Retracement Patterns

The Fibonacci Retracement Patterns are helpful in guiding traders when it comes to identifying supportive and resistive stock positions. These also help in predicting probable market reversals where the stocks start swinging in the opposite direction.

Stocks have a tendency to continue an ongoing trajectory before they meet a reversal again. Marking horizontal lines at the Fibonacci Retracement levels of 23.6%, 38.2%, and 61.8% can help in speculating an upcoming reversal.

swing trading fibonachhi

Many swing traders achieve a convenient exit position in case a stock’s falling price reaches and reverses from the 61.8% mark (resistance), presenting an opportunity to exit with a profit when the stock price moves downward before bouncing off the 23.6% (support) mark.

2. Leveraging Moving Averages (Simple & Exponential)


Considered one of the most leveraged swing trading strategies, using SMAs, EMAs traders can smoothly ride the swings. This is because SMAs/EMAs calculate continuously changing averages over a particular period of time.

Illustratively, traders can sum up the daily prices aftermarket closure for a specific number of days (for example, 20) and divide the same by 20 to obtain an updated average every day.

You can use the 20-day SMA and 40-day EMA as a pivotal part of your swing trading system. In this trading strategy, you have to study and compare the swings between two moving averages – for a shorter period (20 days SMA) and a longer period (40 days EMA). 

Next, you have to observe whether the shorter SMA is going beyond, the longer EMA, and that’s when a buying position or an uptrend occurs. On the other hand, when the shorter SMA becomes lower than, the longer EMA, a selling sign is on the cards, indicating a downtrend. This swing trading strategy can do wonders for any swing trader who’s willing to go the extra mile as far as analysis is concerned.

3. Considering Support and Resistance Levels

Your swing trading strategies must consist of analyzing support and resistance levels. These are treated as the main pillars of the technical swing trading analytics.

Support and Resistance

Supportive pricing levels are positioned below the current market price. These denote a positive phenomenon when the selling pressure in the market succumbs to the buying spree. This is when a supposed downtrend meets a stoppage point and swings in the opposite direction.

The support levels indicate a buying opportunity for you while hinting at a potential stop-loss point just below it. 

Resistive pricing levels are nothing but the reverse of what supportive levels mean. Resistance comes at price levels above the current market position. The buying pressure in the market succumbs to the selling pressure resulting in a change of direction where the uptrend starts swinging downwards.

Thus, you could simply place a stop-loss target over the point of resistance and thereby exit your trade.

Important while using this swing trading strategy: When support or resistance levels are breached, and the price trends tend to continue beyond these points, the supportive and resistive points switch their places.

4. Using the MACD Crossover Swing Trading System


The MACD (Moving Average Convergence Divergence), as a part of the swing trading system, presents accessible opportunities for swing trading and is commonly used swing trading strategy for predicting positions, trends, and stock price reversals.

The MACD includes a couple of moving averages – the MACD line and the signal line. As shown in the above chart, the points where these lines cross are the ones that provide buying and selling signs.

A bearish swing is likely when the MACD line crosses below the signal line, while it’s a bullish swing when the MACD line crosses above the signal line. The uptrend means a buy signal, and the downtrend means a sell signal.

Traders can observe these lines and wait for them to cross again in order to achieve a trade-worthy position in the reverse direction.

5. Referring to Channels for Swing Trading Stocks

Channel Trading

Also known as channel trading, this swing trading strategy is all about identifying a firm trend within a channel. 

When swing trading stocks, at first, you need to ensure if a particular stock chart is showing a bullish trend or a bearish trend. Next, you have to spot a channel that keeps the price fluctuations within. Once you have established a proper channel, look for the positions where the stock prices breach the upper line of the channel.

For example, in an uptrend, when the prices are closing down on the upper line of the channel from beyond its periphery, it forms a selling position.

From a Bullish and Bearish Perspective

No matter which trading style you follow – the bullish or the bearish one, swing trading strategies are meant for everyone! Here, we have dissected the strategy according to how the bulls and the bears of the market typically pursue trading.

Capturing Gains

For the Bulls

A swing trading bull can focus on finding the preliminary uptrend, subsequently resulting in a reverse price movement. This is called a counter-trend, and you’d want your stock to move upwards as soon as possible. Then, as a bullish swing trader, you can make a trade once the uptrend is visible again.

Swing traders can make the most out of this situation. Once you figure out an entry point, look for the lowest stock position from the pullback. That would be your stop-loss point where you can decide upon a safe loss-making position.

Now, look for the topmost point from the upward trend. That would be your profit-generating target position. In case the price position reaches or crosses this point, you can prefer selling at least some quantity from your total number of stocks to ensure profits.

For the Bears

What the bullish strategies say for swing trading, bears can do the same to capitalize on a downtrend. However, it’s essential to be sure of a constant downtrend where the stock is unswervingly underperforming for a significant period of time.

Next, analyze an appropriate entry point and target point just the way bulls would do. A bearish swing trade means the stop-loss position is actually the topmost price point of the latest counter-trend. Once the price surpasses this mark, bears can minimize losses by exiting the trade.

For bears, the ultimate profit position would be the bottommost position of the latest downtrend. Once the stock prices cross this point, you should sell some portion of your holdings to guarantee decent profits.

Entering Your Trade

For the Bulls

Bullish swing trading involves a buy-stop limit order when buying stocks. Here, the stocks are bought at a predetermined price once the stock manages to reach that position.

When a position of a stock option or a call option arises, the bull swing trader can use a one-cancels-other order to sell it immediately when a stop-loss or profit target point is reached. 

This entering trade strategy ensures that while one sell order is successfully executed, the other gets canceled.

For the Bears

In bearish swing trading, the bears can possibly use a sell-stop limit order for trading. This means an order for selling short would be placed once the stock reaches the entry point.

Counter-trend Trading

Some swing trading professionals play along the counter-trend. They take bearish positions near the highs against the tides during uptrends (expecting the stock to reverse and go downwards).

During the downtrends, one would be taking bullish positions near the lows (expecting the stock to reverse and go upwards). This strategy is also called fading, apart from counter-trend trading. 

The Plan of Action for Swing Traders

Here’s a stepwise plan of action to help you start swing trading stocks in a systematic manner:

  • Conduct a Technical Research and Analysis
  • Shortlist the Assets to Swing Trade
  • Decide Upon Your Risk Management Tactics
  • Assess the Market Positions in Real-Time
  • Exit the Trade

Choosing the Right Stocks for Swing Trading

Here are three fundamental practices to help you choose the right stocks for swing trading:

Analyze Chart Patterns

Analyzing chart patterns would give you a firm idea of whether a stock is undergoing a downward movement or an upward one. This can help in predicting market reversals.

Take into Account Earning Calendars

Earning calendars come in really handy as they help you take into consideration unpredictable price movements, further assisting you with your swing trading strategies.

Study the Economic Calendar

Keeping track of the economic calendar can help you determine the status of a country’s economic position and factor in risks and opportunities.

Below video from Samco explains it properly:

Swing Trading and Day Trading: The Difference

Swing traders and day traders have their own set of purposes and strategies to pursue the stock markets.

The stock holding time between entry and exit points is the main difference between swing trading and day trading. In addition, swing trading means holding the stocks for at least one entire trading session, bringing in overnight risks into the mix.

In comparison, day trading means buying and selling securities the same day prior to the market closure. Hence, a swing trader looks for gains over multiple days or weeks while day traders aim to earn daily profits.

In terms of risks, swing trading includes price breaks or overnight market reversals against the last open-market position. Hence, swing traders prefer smaller position sizes as compared to day traders. This is because day trading involves recurring transaction costs, and thus, buying larger position sizes is the usual trading style.

In terms of a swing trading indicator, swing traders majorly utilize price movements, currency fluctuations, and fundamental analysis, to name a few. On the contrary, day traders majorly depend on a constant technical analysis and intra-day chart patterns, including hourly stock positions.

Most importantly, there’s a lesser quantity of trades with a higher face value of profits/losses in the case of swing trading. Conversely, day traders indulge in a large number of trades occurring and resulting in a smaller face value of profits/losses.

The Advantages and Disadvantages of Swing Trading

Before moving on to the different swing trading strategies, it’s essential to take note of the advantages and disadvantages associated with swing trading. It has a particular set of benefits and factors with its own risk.

Advantages of Swing Trading

Takes Lesser Time: Swing trading is less time-consuming based on the duration of market monitoring needed as compared to day trading. Also, swing traders can capture gains equivalent to that of day traders but in a shorter time period.

Potential Short-Term Profits: Despite being categorized as a short-term strategy in itself, swing trading makes the most of the profitability arising out of market swing capitalization. For instance, studying an hourly chart at a particular time would suffice for swing traders to plan their entry/exit points and maximize their returns.

Reliable Analytical Strategies: Swing trading comes with the utmost clarity when the price trends are bullish and bearish. This is possible using analytical tactics and close observations of daily and weekly chart patterns. Also, there’s a greater chance to overcome market reversals by leveraging technical and fundamental analysis. 

Financial Flexibility: There’s a great value against investment when it comes to swing trading. Your funds won’t get stuck into underperforming security for longer durations. In case any of your stock consistently attains a downward rollercoaster, you can simply opt to incur a negligible loss and reinvest the funds elsewhere. This is how you can have substantial flexibility and control over your funds via swing trading.

Disadvantages of Swing Trading

Risky Trade Positions: Swing trading goes hand-in-hand with risky trade positions. Price gaps, overnight market reversals, and even worse – post-weekend shockers are part and parcel of swing trading. Therefore, it may happen that your stop-loss plans could go upside down. 

Missing out on Elevated Profits: There’s always a chance to miss out on long-term profits when you’re selling your stocks for modest short-term returns. Firstly, you can lose out on an opportunity to capture massive gains from a stock you just sold. Secondly, you can end up skipping buy calls of another stock that could earn you way more in, let’s say, six months of time, as compared to the stock you bought for a few weeks.

External Factors: It’s a no-brainer how factors like international politics, pandemics, global crisis, or fiscal policies could affect the stock market. Swing traders may incur huge losses due to unpredictable market corrections in such scenarios.

Key Takeaways for Swing Traders

Swing trading strategies comprise trades lasting for more than a trading session up to a few weeks or a month, tentatively.

Swing traders are exposed to risks when the market is closed, and these risks impose potential overnight mishaps and post-weekend shockers.

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