Swing trading setups don’t have to be complicated to be successful. Finding the best setups to trade goes a long way to trading successfully.
Swing trading is a short term strategy. It’s used to trade stocks or options where you hold for 2-6 days sometimes more. However most people are familiar with day trading because it’s getting in and out of trade the same day. Take our swing trading course to learn more about swing trading setups.
Swing trading techniques are great to employ for people who are under the PDT rule as well as can’t be in front of a computer all the time.
SWING TRADING SETUPS
A great way to implement swing trading strategies for beginners is to find the best setups. You can use scans, patterns and technical analysis. The best time to swing trade is when the market is in a defined trend. Especially when trading options such as naked calls and puts.
You’re trying to capture gains by holding overnight up to a few weeks. If the market is bouncing all over the place, it’s hard to get a profit. Hence the trend is your friend.
You’re going to have a larger price range to profit so it’s important to find the best setups. Because of holding overnight, the risk of after hours and pre-market news can affect your position.
However, swing trading allows traders to get by the PDT (pattern day trading) rule. So if you’re account is under $25,000, you’re limited in the number of day trades you can make in a week.
With swing trading, if you see a stock you like you can buy before market close and sell the next day. This bypasses the PDT rule as well as giving you a profit.
The important thing to remember is that you need the best setup because that can be risky.
SWING TRADING SETUPS – SCANS
Using scanners is a great way to find swing trading setups. You can use preset scans or customize them for what you like. You can use the scanners on your trading platform.
Platforms like Thinkorswim have scanners you can customize to find what you like to trade. You can find stocks that are pulling back in a trending market.
If you want to trade options, you can set as scan to find sideways stocks. Then you can trade spreads since those are best with small moves.
The resource Market Club is excellent for swing trading setups. You can use them to find stocks to trade and they don’t cost a lot of money. Read our Market Club review to learn more.
SWING TRADING SETUPS – PATTERNS
Patterns play a huge role in trading. They let you know how other traders view stocks. Patterns supply support and resistance also. Hence the importance of knowing patterns for all stock market trading.
For example, lets say you want to take a bullish position on a trade but you see a head and shoulders pattern. Head and shoulders patterns are bearish. If you went bullish on the trade, chances are you’re going to end up taking a loss.
Inverse head and shoulders patterns are the bullish equivalent. You’d want to trade that pattern if you’re bullish.
Cup and handle patterns are popular swing trading setups. Once price breaks out of the handle, price should head on up.
In essence, you’re looking for breakouts to trade. It doesn’t matter whether you’re bullish or bearish bias. There’s always going to be a pattern for you to trade.
It’s all about knowing what patterns mean and what they look like. Hence the need to study them.
SWING TRADING SETUPS – TECHNICAL ANALYSIS
Support and resistance, moving averages, RSI these are just some of the tools you can use. Support and resistance is such an important part of trading. When you’re swing trading you need room for price to move.
If you buy a stock at resistance, you’re going to have a hard time getting through that. However, if you buy at support then you have the room to run to resistance.
Moving average lines can play a big part in the support and resistance game. Watch how price trades around them. You might find price hit a simple moving average repeatedly and fall.
Moving averages also give you buy and sell signals. Moving average crossovers can be one of the fantastic swing trading setups. The 9 and 20 EMAs have the death cross and the golden cross.
Those are extremely useful in swing trading. You can get in when a golden cross happens as well as get out or go bearish on a death cross.
SWING TRADING SETUPS – PRACTICE THEM
Swing trading can be risky because of overnight holding. The best thing to do is practice the swing trading setups. See how they work. In theory they may sound good but actually trading them can have the opposite result.
Practicing in a paper trading account lets you see how they work without risking your brokerage account. Patterns break down. News affects stocks. Practice and see how these work. Then when you go with real money you have a good handle on how swing trading setups work for you.