Learning swing trading strategies takes time and is an art form in and of itself. There are several high-probability swing trading strategies, and will want to find the right one. Finding the right one to fit your lifestyle and personality is important!
Table of Contents
- Swing Trading Strategies for Beginners
- A Deep Dive Into the 9/20 EMA Strategy
- Does Swing Trading Work?
- How to Swing Trade Stocks With Simple Moving Averages
- Options
- What Indicators Are Best for Swing Trading?
- Which Time Frame Is Best for Swing Trading Strategies?
- How to Manage Risk Swing Trading
- How Much Money Do You Need to Be a Swing Trader?
Swing Trading Strategies for Beginners
- Ride the tradeline (9 or 13 EMA)
- Dip Buying Reversal Candles Off Support Levels
- Options Credit Spreads
Riding the 9ema on a trending stock is a popular swing trading strategy. When following this 9ema strategy, it is important to find stocks with strong momentum in an overall uptrend and then use the 9ema to ride the stock up. Conversely, use the inverse strategy if playing a bearish stock and wish to short it; ride it down.
Watch for a candlestick close above the 9ema (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. Moving average crossovers can play a huge role in spotting a trend. This is where a 9day moving average crosses above 20-day moving average, a bullish signal.
Can use a 5-minute and/or 15-minute chart time frames to find an entry. Ideally, want to try and get an entry on the 3 minute to get another time frame’s worth of information to add to the other charts to create a game plan. Feel free to use whatever time frame(s) that works best for the trading style being used; whether day trading or for swing trading setups.
Once an entry is picked, ideally want to see that 9 ema start pushing upwards and separating from the 20 ema. The daily candlesticks also need to move up with the 9 ema. Sometimes the 9ema 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 pullbacks and dips do not effect the trade plan and that it is important to stick to our game plan and profit-taking targets.
A close below the 9 ema on the daily chart would be a potential sign of weakness and time to take profits or cut losses. Be aware of the potential stop loss area; from the low of that previous candle to determine if willing to stay in the trade.
Often, a stock will doji below the 9ema and bounce, causing a possible fake out; which can cause a premature stop out. Just be aware and follow the technicals to determine exit strategies. Some traders prefer to use the candle CLOSE price as my stop instead of a doji; mainly because too many time dojos can cause a stop out. Ultimately, it depends on the entry price and risk tolerance to choosing where to get stopped out.
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 watch for the 9ema/20ema crossover and a candlestick to close above the 9ema on the daily chart.
Ideally try for an entry to be the next candle to break the high of that previous candle on the daily chart pair that information to the 5-minute or 15-minute chart as well for an entry idea. When trading this 9/20 ema crossover strategy, it is important to know the other moving averages, such as the 50 or 200 Simple Moving Average (SMA).
If they are above position, then they are potential resistance areas. If they are below, they are support levels. Also, do not forget to draw 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 know the trader has a good understanding of how price action and technical analysis work. Once the technicals are understood, figure out which strategy is best to trade for your own trading style.
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 recommend having the 50sma and 200sma lines on your daily charts. These are 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.
Try and find angular trend line resistance or a daily and/or weekly moving average time as a profit target. TrendSpider is great for charting and makes this really easy.
If looking to make an entry in on a 9/20 crossover, then ideally, like some room for the stock to run before it hits those overhead moving averages. The closer the price gets to those moving average lines, the more likely traders will look to take their profits.
Options
Options strategies work the same way as 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 is important always to ensure 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 money 100% of the time.
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. Just manage risk, be patient, chart the stock, and wait for an 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
- MACD
If 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 will walk you through everything.
It is our way of giving back and paying it forward! We know learning how to draw support and resistance levels is extremely important. 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 a great 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. Finally, 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.
Do not let emotions get in the way of trading. This is why it is important to always define potential entry and exit strategies before entering any trade. This better helps being prepared and therefore not scrambling to figure out what to do as the stock goes up or down!
Aim for at least a 2:1 profit/loss ratio to ensure that potential gains outweigh losses. Then, cut losses quickly if a trade goes against the plan. Some traders even look for 4:1 profit-loss ratios!
The best traders in the world fail on trades close to 40% of the time. However, they have become masters at cutting losses quickly; as well as; they realize that the market and their trade could turn against them anytime. While also knowing how to hedge for outside events.
These traders have been around while knowing all about risk. That is why they predefined their risk management strategies. This allows them to separate their emotions when trading. This takes time to develop and practice. Proper technical analysis techniques will be critical when determining whether to enter a swing trade.
The Cloud is a popular indicator traders use with swing trading strategies. It gives a great overall picture of support and resistance areas. Dip buying is a popular swing trading strategy that we suggest everyone should look into to learn how to find good swing trade entries that minimize risk.
How Much Money Do You Need to Be a Swing Trader?
- For options, best to have between $2,500 to $5,000
- For penny stocks: $5,000 to $10,000
- For stocks over $10.00; best to have a funded day trade account of $25,000
