Picking the best swing trade stocks is one of the most important things you can learn. You can know all the best setups but need the right stocks to make money. What is swing trading? Traders attempt to capture gains in a stock within an overnight hold to several weeks. In other words, swing trading stocks is short-term trading where your position typically lasts 2-6 days up to a few weeks or months.
Swing trading allows you to bypass the PDT (pattern day trader) rule if your account is smaller than $25,000. As a swing trader, you need to know how to pick stocks to trade.
The best swing trade stock you can find needs to be able to make good moves in a shorter period.
Don't Fall for Hype!
The best swing trade stocks make nice moves quickly. You’re not getting in and out on the same day, so you want something that will move at least overnight. You want to remember to avoid getting caught up in the hype.
Yes, there’s excitement with stocks with nice moves but don’t jump in when you hear a stock being hyped up. That’s a good way to lose money. Instead focus on price action. Price action is a stock’s movement in price coupled with technical analysis. When you find a stock that makes significant moves on a multi-4day time frame without hype, you’re not relying on others to pump it up.
Large-cap stocks such as Amazon, Nvidia, and Tesla make large moves from day to day. They can also get expensive. Finding stocks that are $20-$50 is good.
You want to have a little variety when looking for the best swing trade stock. They say variety is the spice of life. The same can be said for swing trading.
Know Your Time Frame and Follow News
When looking for the best swing trade stocks it’s important to know the time frame you plan on holding the stock. You can look at your trading history to see when you’re most profitable.
Because you’re swing trading you need to follow news. News can change the direction of a stock. Since you’re holding at least overnight, it’s important to follow the news.
Earnings, good news and bad news can cause you to make or lose a lot of money. It’s important to be aware of whats on the calendar for swing trade stocks you’re interested in.
Technical analysis is incredibly important when looking for the best swing trade stocks. Candlesticks provide support and resistance along with moving average lines such as the simple moving average formula.
Traders are super aware of these levels. Candlesticks also tell stories. It’s important to know what bullish candlesticks, bearish candlesticks and doji candlesticks mean. That along with moving averages can give you buy and sell signals.
You’re holding a stock for more than a day so you need to know what direction it’s going to go. If you miss on that, you’re looking at losing out on profit. Technical analysis can tell you so much.
It is important to remember though, that even with these tools, you will lose. Even the best traders lose 30-40% of the time and that’s ok. Technical indicators can help to minimize the loss.
Can You Get Rich Swing Trading?
Many swing traders make over $100,000 per year incomes. However, like anything in life it takes time and practice. Swing trading is just like any other profession. If you put in the time and the energy to study and learn then it can be a very lucrative profession.
Something else that’s important to know when picking the best swing trade stocks is patterns. Patterns can help you determine a direction along with those technicals.
Depending on what type of trader you are, long or short, you can use the patterns to get the perfect set up. Those candlesticks you learned about group together to form patterns.
Patterns break down all the time though. You can wait for confirmation before getting in. It’s ok to be a little late to the party. It’s safer and you still profit.
Look for signs that candlesticks such as gravestone doji candlesticks or inverted hammer candlesticks give you. There’s always warnings and signals to be found. Look for patterns within patterns to trade as you wait for the big patterns to set up.
Finding the best swing trade stocks is important if you want to make a profit. Knowing patterns and technical analysis will help to get those good entries and exits.
If you need more help, take our swing trading course.