How To Swing Trade Stocks
Traders in this market are finding that volatility will not subside anytime soon. This means having access to tools and trading techniques that work with – not against – volatility to make markets chop and uncertainty tradable.
Traders at Simpler Trading have different methods of trading that they prefer. While day traders prefer the quick entry and exit strategy, swing traders prefer to ride the waves to see what happens. A longer time frame gives traders a more versatile opportunity to consider their options, as a swing trader can hold the stock for days, weeks, or even months.
What Is Swing Trading?
A swing trade is the trading method where traders buy or short a stock and hold the position for days or weeks. Swing traders use technical analysis and read chart patterns to find stocks to buy or sell. Technical analysis is different from fundamental analysis, which relies on company earnings, growth data, and longer-term projections to analyze a stock. With swing trading, traders seek to pinpoint when a stock is poised to move, giving them opportunities to take advantage of that move.
Best Stocks for Swing Trading
With much consideration, research, and chart analysis, traders uncover which stocks have the most potential for actionable setups. The market never slows down, which means making sound decisions is crucial to staying in the game.
Traders stay relevant in the market through a trading strategy that works well for the current conditions. This includes finding opportunities, defining your entry and exit strategy, and sticking with your trading plan. Knowing what to look for in a swing trade setup means assessing a stock’s position. Stocks that trend will generally have the most potential with a swing trading strategy.
Traders most often swing trade with equities, but there are other types of investments available, including:
- Penny Stocks
Whichever asset type you choose, understanding not just the strategy of the swing trade but the asset and market you are trading is essential.
How To Manage Risk While Swing Trading
There is no such thing as a safe or “foolproof” trading method. Our traders at Simpler Trading would never tell you otherwise. All trading carries high risk; however, it’s how you handle that risk and plan for it that separates the better traders from the pack. Swing trading is not safer than day trading; It is simply a method that traders choose because it either works for them or compliments their trading style.
Traders can and should take measures to mitigate risk. For example, they can set a stop-loss order and a profit target order on their trades to provide a “safety net” should the market encounter a landslide of losses. Another way traders can mitigate risk is by using indicators they can understand and which work well with market conditions.
A favorite technical indicator that Simpler traders use as part of their trading strategy is the ST-Squeeze. This indicator alerts traders when the price action of a stock consolidates, or trades in a tight range, and builds up energy before its next move.
How To Find Stocks To Swing Trade – Swing Trading Indicators
John Carter, the founder of Simpler Trading and creator of the TTM_Squeeze©, is free on trading platforms such as thinkorswim©, tastytrade, and TradingView. John uses the squeeze in almost all of his trades where he can redefine volatility and use it to his advantage.
To easily add the free TTM_Squeeze© to your thinkorswim© charts:
- login to your thinkorswim© account
- select the studies button
- add study
- find John F. Carter’s studies
- Select the TTM_Squeeze©
It will be the simplest thing you do all day. As with any trade, a proper entry is a key to a solid setup. With the longer hold time of a swing trade, it’s crucial to enter and exit a trade at the right time to consistently build your trading account.
Swing Trading with the Moxie Indicator
If you are looking for a premium indicator, then look no further than TG Watkins’ favorite proprietary indicator, the Moxie Indicator. The indicator can work in various market conditions and is designed for day traders, swing traders, and investors looking for an advantage in the market.
- Precise entry and exit points in trades
- Great indicator for options, futures, and stocks.
- Ability to trade in multiple time frames
- Find dips to buy
- Catch tradeable turns in market direction
The stock market is risky and studying the charts and analytics takes time. Traders who aren’t learning how to trade under a mentor should make this a priority. They can learn swing trade setups, understand the nuances of the stock market, and grow their accounts by using trading methods that allow them to position themselves on the right side of the market.
Simpler Trading offers not only several courses and subscriptions but also a free trading room that allows traders to learn the basics of the stock market. Our team will help you with the kind of strategy you are into, whether it is swing trading, day trading, or investing.
Three Things Swing Traders Do
It’s essential that you have an understanding of what to do in the market. A defined plan and being prepared is key when trading in the stock market. Below is what our traders do to swing trade.
Open an Online Account
Opening an online brokerage account through companies such as TD Ameritrade, tastytrade, and TradeStation is the first step. Since these companies vary in fees and features, it’s recommended that traders “paper trade” which is a way to practice without real money.
These platforms offer free indicators and learning centers, as well. Traders find that using a mentor and applying indicators and screeners to their charts helps them find their ideal stocks for swing trades.
Rely on chart patterns
Each trader has an ideal chart setup, which incorporates their favorite indicators for analyzing chart patterns. Most traders use moving averages to determine the trend in a stock. You can see in the screenshot below that the moving averages indicate the stock is trending in an upward direction because it’s going from the lower left to the upper right of the chart.
Below the price chart is the TTM_Squeeze, which alerts traders that energy is building up in stock, potentially leading to an explosive move. In this screenshot, the indicator gave the trader a heads up that the stock was consolidating, squeezing, and preparing to move. Since a stock in consolidation doesn’t give us a clue as to which way it will move, we need to use other indicators, such as moving averages, to help with which direction it will fire.
Know Important Economic Reporting Dates
The most overlooked data for traders are economic reports on the trading calendar. They should refer to the significant dates of planned events, such as quarterly earnings reports, announcements and meetings of the Central Bank, and even major global events.
Traders should monitor the news, and stay updated on the U.S. economic factors that impact the broader market. Foreign economic situations, such as the Russia-Ukraine war crisis in Europe, affect the global food and oil supplies, which can cause losses within your portfolio.
Earnings reports provide the financial statuses of publicly traded corporations quarterly. These are most often released three weeks after the fiscal quarter ends. The fiscal year and each quarter within it ends on the same date. The company’s guidance gives investors and traders an insight into company projections. If guidance doesn’t go well, stock prices generally plummet.
Next Step, Swing Trade!
Once a trade entry has been identified, knowing the target exit is the second step of your setup. Traders can then establish a stop loss which helps prevent overriding emotions that often cause traders to lose money. Traders shouldn’t go against their trading strategy; doing so can result in more significant losses than necessary.
Understand, there will be losses along with the wins; there’s no getting around that. The goal of building a trading account is to have a higher percentage of wins than losses. It is essential to pay close attention to risk management tools to help traders make consistency in trading.
Traders should have a time frame in mind for their trading setup. If the stock doesn’t move in the right direction or is stagnant, having a time frame will help traders decide if they should stay in their position or exit altogether. When that date approaches and neither your stop loss nor your take profit order has occurred, this could mean it is time to close the trade to move on to another trading setup.
After reading this article if you find yourself unsure to confidently trade in the market, then why not consider joining me in my Moxie Indicator™ Mastery where you can trade with me on a monthly basis, get real-time alerts, and a weekly video of my thoughts on the market. Sign up today and never trade alone again.
FAQs on Swing Trading
A: Traders can learn to use technical analysis and indicators to identify swing trade stocks. Some chart indicators, like the TTM_Squeeze©, are free. The moving averages also help traders identify trending stock prices. Indicators can help traders find the best stocks out of thousands for swing trading setups.
A: It’s not uncommon to start with $5,000 or $10,000. However, you can start swing trading with options with as little as $500. Simpler Trading offers the Small Account Mastery so traders can learn to grow their trading accounts while limiting risks that could cause them to lose it all.
A: Find stocks with positive momentum and strong volume. The TTM_Squeeze© indicator, free on thinkorswim© and tastytrade, can help traders identify stocks that are positioned to make a move. The Simpler Trading Scanner also allows traders to find stocks in positions for swing trades.
A: Stocks trading below $5 per share are considered penny stocks. These can be volatile and are considered especially risky. They can be appealing because they have way more upside potential than downside. But, it’s important to remember that they have a low stock price for a reason.
The profits could be huge should you buy a high quantity of shares and they moved upward. But, these trades are considered speculative, and limiting your losses becomes vital when you play the penny stock market.
A: The best small-cap stocks to buy are those with a bullish trend – meaning the shorter period moving averages are above the longer period moving averages and price is making higher highs and higher lows.
The best time to buy a stock is when it pulls back to its key moving average but maintains a bullish trend that doesn’t break below the moving average.