Swing Trading Techniques

Swing Trading Techniques

6 min read

For those of you stuck in the 9-5 grind without any time to catch the daily momentum wave, this is the blog you want to read! Today, I want to talk to you about swing trading techniques, how profit from them and why they may be right for you. 

What Is Swing Trading?

When you’re applying the swing trading technique, you are holding a stock overnight up to several weeks. You want to capitalize on short term price movement.

Look for stocks that have the ability to have large moves in the short term. We also recommend finding stocks with a defined channel or pattern. A typical swing trade lasts 2-6 days with the goal of capturing a large price movement in a shorter amount of time.

Swing trading is a great trading technique you can use to make money. Knowing how to read a chart, patterns and technical analysis is key to conquering swing trading. Create a good game plan, practice on paper, and watch how successful you’ll be!

Swing Trading Techniques

Swing traders use multi day charts to find their entries and exits. The chart time frames such as 15 minute, 1 hour or daily chart show you patterns. Patterns are so important. So are candlesticks. They carry so much information and give you signals for swing trading.

It’s important to be able to tell a direction a stock will move. This gives you a heads up as to where or not you should be bullish or bearish and lets your know what swing trading techniques you should be using. The trend is your friend.

With swing trading techniques, you’re holding a stock overnight so you take on that overnight risk.

One Swing Trading Strategy To Minimize Risk

One technique to mitigate the risk and avoid getting stopped out and using a day trade that would affect your PDT rule, is to enter swing trades towards the end of the day, and only stocks that have held within their days high, into the close. We like stocks with good setups and are within .10 to .15 cents going into the bell. Of course, things like news can change the direction of a stock.

Nothing is ever set in stone in the markets. But knowing what those patterns, trends and candlesticks are telling you will go a long way to help minimize your risk.

The Bullish Trend

Stocks rarely move in a straight line. That would be too easy. Often, bullish stocks will move like steps up a staircase. Bull flags will have make that flag pole move up, then go sideways a little and consolidate before shooting another flag pole back up.

When you’re bullish in your swing trading techniques you want to wait for that pullback for an entry. Typically with swing trading we look for “three waves” before a consolidation move, or selloff move, often back to the lower end of the channel or support. This becomes a short term bearish trend within an overall uptrend.

This counter trend gives you a good entry. You want to capture the gains on the move to the upside. Only enter a swing trade after the stock resumes it’s uptrend and has finished its dip. When you find your entry, find your profit target and be prepared to exit when it hits it.

When To Take Profits?

A profit target is usually at a key resistance point. Resistance is usually the highest point of the uptrend. Sometimes a stock can break resistance and climb higher. Often times, it hits resistance and falls back down to support. This is why support and resistance are so important.

Having your entry and profit target gives you a an approximate reward for the trade. You want your reward to be greater than your risk. If the risk is greater than the reward, then the trade isn’t a good one to make. We like at least a 2 to 1 profit ration. So, think risking ten cents to make 20 cents, for example.

The Bearish Trend

Bearish swing trading techniques work opposite of bullish. Instead of taking the stairs up, you take the stairs down. Instead of bull flags, you see bear flags. You want to capture the gains going down. But make sure it isn’t a fake out. Make sure the stock heads lower than the previous day.

The counter trend heads up before resuming it’s path back down. When you’re bearish, you’re selling short or buying puts, or selling a bear call spread. When you’re selling short, you’re borrowing shares from your broker to buy back a at a cheaper price.

Put options are great for this as well. Buying an in the money put option gives you great alternative to just going short. You also want to find your profit target. The profit target for a bearish play would be the support point. 

We teach how to trade live in our trading rooms. Check out our trading service to learn more.

Find the lowest support from the previous fall and use that as a profit target.

Ichimoku Cloud And The Swing Trading Technique

The Ichimoku cloud defines support and resistance, identifies the direction of a trend, gauges momentum and gives trading signals. It gives you all the important information at a glance. This can be used as one of the best swing trading techniques out there.

The Ichimoku cloud can be scary to look if you don’t know how to read it. But it gives so much information at a glance. It’s actually pretty easy to understand when you study it and ends up being a simple sing trading strategy.

When you’re swing trading, you’ll have a clear direction. Having that will tell you what swing trading techniques you want to use. Take our swing trade course.

Swing Trades

Here’s a chart for Amazon. It’s trading above the Ichimoku cloud, therefore it’s in a bullish trend. The cloud is green which is also a bullish sign. Notice the candlesticks are doing their stair step (bull flags) up.

Learning the right swing trading techniques gives you tools necessary to succeed. It’s a great way to trade when you can’t find the time to trade during the day. A key selling feature is that you get to bypass the PDT rule.

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