Learning swing trading strategies takes time and is an art form in and of itself. There are several different high-probability swing trading strategies to choose from, and you will want to find the right strategy for you. Finding the right one to fit your lifestyle and personality is key!
Swing Trading Strategies for Beginners
- Ride the 9 or 13 EMA
- Dip Buying Reversal Candles Off Support Levels
- Options Credit Spreads
Riding the nine ema on a trending stock is one of the more popular swing trading strategies. When following this nine ema strategy, it’s important to find stocks with strong momentum in an overall uptrend and then use the nine ema to ride the stock up. Conversely, use the inverse strategy if you’re playing a bearish stock and wish to short it. (Ride the 9 EMA down).
Watch for a candlestick close above the nine exponential moving average on the daily chart. Then buy the first intraday candle that breaks the high of that previous daily candle using the base of that previous candle as a stop. It’s also nice to spot 9EMA / 20EMA crossovers. This is where a nine-day moving average crosses over the top of a 20-day moving average, signaling to the bulls the party is underway.
You could use a 5-minute or 15-minute chart time frame to find an entry. Ideally, you’d want to try and get your entry on the 1 minute to get your best fill, but some traders like to use the 5 min for swing trading setups.
Once you get your entry, you ideally want to see that nine ema start to push upwards and separate from the 20 ema. The daily candlesticks also need to move up with your 9 ema. Sometimes the nine ema will trade sideways before it starts pointing upwards. But, the 9 ema needs to push upwards for a potential continuation.
Always wait for confirmation on swing trading strategies. Realize that buying closer to the 9 ema is less risky than buying further away from the nine ema. We want to get the best entry possible with swing trading setups so that we can stomach the pullbacks, dips, and profit-taking.
A close below the nine ema on the daily chart would be a potential sign of weakness and time to take your profits or cut your losses. Also, be aware of your stop from the low of that previous candle to determine if you will stay in the trade.
Often, a stock will doji below the nine and bounce, causing a fake out. This will cause you to stop out prematurely. Just be aware and follow the technicals to determine your exit strategies. I prefer candle CLOSE price as my stop instead of a doji. This is because I have had too many dojos stop me out in the past and learn the hard way. But ultimately, it depends on my entry price where I get stopped.
A Deep Dive Into the 9/20 EMA Strategy
Let’s go a little bit more into the popular 9/20EMA swing trading strategy. The key here is to watch for a 9/20 ema crossover on a daily chart. Often, stocks moving average lines will be in a downtrend or tied up in a consolidation phase. So you’re watching for the nine ema to cross the 20 ema and a candlestick to close above the nine ema on the daily chart.
Your entry would be the next candle to break the high of that previous candle on the daily chart using the 5-minute or 15-minute chart as your entry. When trading this 9/20 ema crossover strategy, it’s important to know the other moving averages, such as the 50 or 200 SMA. If they are above your position, then they are potential resistance areas. If they are below, they are support levels. Also, don’t forget to draw your diagonal trend lines to find support and resistance levels on your charts! These are swing trading strategies that work over and over again.
Does Swing Trading Work?
Swing trading does work if you know how price action and technical analysis work. Once you know the technicals, you must know which strategy is best to trade. Credit spreads are a great way to sell stocks and collect a premium. Buying shares of a stock off support and selling near resistance levels also is profitable.
How to Swing Trade Stocks With Simple Moving Averages
We’d recommend having the 50 simple moving average and 200 simple moving average lines on your daily charts. These are the most popular SMA lines that traders pay attention to. Some traders also like to have the 100 sma as well.
Moving average lines play the role of showing key support and resistance areas. The more room that the stock has to run, the better.
I will try and find angular trend line resistance or a daily or weekly moving average time as a profit target ahead of time. Again, I love to use TrendSpider for this because it makes it so easy! Again, if you get in on a 9/20 crossover, then ideally, you’d like some room for the stock to run before it hits those overhead moving average lines. The closer the price gets to those moving average lines, the more likely traders will look to take their profits.
Options strategies work the same way as we discussed above. First, follow the technical analysis of the 9 ema. Then, look for trending stocks and ones with potential 9/20 ema crossovers.
It’s important always to ensure you take your profits along the way, especially when selling options. Never get too greedy. Remember, no one can predict what a stock will do, and no strategy will make you money 100% of the time. If you see someone claiming otherwise, you know they are full of it.
All it takes is one trader somewhere in the world to change the direction of a stock. A big seller when everyone is buying or a big buyer when everyone is selling. Or it could be a news headline that causes the surge or drop in a stock. It’s all good. Just manage your risk, be patient, chart your stock, and wait for your entry!!
What Indicators Are Best for Swing Trading?
Here’s a list of what indicators are best for swing trading:
- Price action combined with candlesticks
- Stock volume and high relative volume = liquidity
- Moving average lines. They help you determine support and resistance guides
- RSI (Relative Strength Index) shows overbought and oversold levels
If you’re looking for how to swing trade stocks and set up your swing trading indicators effectively, then make sure to take our free swing trading course at the bottom of this post. It’s going to walk you through everything. It’s our way of giving back and paying it forward!
We know it’s extremely important to learn how to draw support and resistance levels. Learning how to chart a stock and find critical support and resistance levels will be an important process when using these simple swing trading strategies that work.
Which Time Frame Is Best for Swing Trading Strategies?
The daily chart is the best time frame for swing trading, less than a few weeks. One-hour charts are good for holding less than a week. Weekly charts are good time frames for trading weeks to months out. Monthly charts are good for holding for several months.
How to Manage Risk Swing Trading
There are always stocks with great entries to swing trade several times per week, so don’t get FOMO. Fear of Missing Out! This is why most traders fail.
They let their emotions get in the way of their trading. This is why it’s important to always define your potential entry and exit strategies before entering any trade. Then you are not scrambling to figure out what to do as the stock goes up or down!
Always have at least a 2:1 profit/loss ratio to ensure that your potential gains outweigh your losses. Then, cut your losses quickly if a trade goes against you. I usually look for 4:1 profit-loss ratios.
The best traders in the world fail on trades close to 40% of the time. However, they’ve become masters at cutting their losses quickly. They realize that the market and their trade could turn against them anytime. They also know how to hedge for events.
These traders have been around while knowing all about risk. That’s why they predefined their risk management strategies. This allows them to separate their emotions when trading. This takes time to develop and practice. You can do it! Proper technical analysis techniques will be critical when determining whether to enter a swing trade.
The Cloud is a popular indicator trader use with swing trading strategies. It gives you a great overall picture of support and resistance areas. Dip buying is a popular swing trading strategy that you should look into to learn how to find good swing trade entries that minimize your risk.
How Much Money Do You Need to Be a Swing Trader?
How much money do you need to be a swing trader? For options, it’s best to have between $2500 to $5,000; for penny stocks, $5,000 to $10,000. For stocks over $10, it’s best to have over $25,000.