3 Swing Trading Strategies: Investing in the stock market by buying stocks periodically and holding for the long-term isn’t the only way to make money. Swing trading can also helps us to extract profits. This method is typically completes in time frames equaling a day to several weeks.
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What Is Swing Trading?
Swing trading mixes fundamentals and technical analysis. Identifying a company with solid fundamentals before purchasing shares helps safeguard against the announcement of poor financial numbers.
After analyzing a company’s balance sheet and P&L statements, it can be looked at technically to identify trends in the price action. Trading with long or short positions is done to take advantage of the volatility in price. The main goal is to extract short-term or midterm gains when they’re offered using one or more swing trading strategies.
One of the first swing trading strategies is identifying when the stock is trading in a specific range. Which can look like a box or channel. According to the experts at SoFi, “Channel traders accept that each stock is going to trade within a certain range of volatility, known as a channel.”
Buying at an area of support near the bottom portion of the channel and selling at a resistance area at the top is the primary plan. It entails waiting for the price to reach an area of support. If the stock trades slightly under this area and bounces back strongly. It can be bought with a stop loss placed directly under the last candlestick low. Profits are taken slightly below resistance to help ensure a higher probability of having successful trades.
The second strategy identifies an uptrend in the market and looks for areas to enter after the stock pulls back. Waiting for a deep pullback is best as it provides more room to generate a profit. Identifying a pullback to a significant moving average (MA), such as the 50-period MA or 200-period MA, improves the odds for the trade to work.
Similar to strategy #1, a pullback is need, When the price action gets to the moving average and bounces off that area. A stop loss is places below the last candlestick low. Profits are taken along the way or slightly below resistance to help ensure gains are booked.
The third trading strategy involves shortening at an area of resistance. Traders who prefer going against the crowd or fading a move will like using this method. After identifying strong momentum into resistance, a price rejection slightly over the high for that area should be looks for and shorted. Using the high of the last candlestick as a stop loss helps protect capital. If the trade goes wrong shortly after being taken.
Trading within daily or weekly timeframes using one or more of these swing trading strategies can help a trader book gains faster than long-term investing methods. According to the experts at SoFi, There is no surefire process. But it might be best to find an approach and stick with it.