Swing Trading | How to Swing Trade for Beginners

• Stocks –   These are small pieces of a company, that allow people to buy shares into the business. The best stocks for swing trading are those with large caps since they are usually the most actively traded.
• Forex – In the forex trading market, traders enjoy excellent liquidity and high enough volatility to ensure significant price moves. The USD, EUR, JPY and GBP are among the most popular currencies for forex swing trading.
• Exchange-Traded Funds (ETFs) – An ETF is a bucket of securities like bonds, commodities, stocks, etc. that you can buy or sell through a brokerage firm. Strongly trending ETFs are a great choice of asset for swing traders.
• Cryptocurrencies – Since swing trading makes gains from price shifts, assets with high volatility such as cryptocurrencies offer massive potential for profitability.
• Contracts for Difference (CFDs) – CFDs allow you to speculate on asset price movements without owning these assets. As such, CFDs are also a great choice as you can trade virtually any asset using this technique.

• Frequent opportunities to make gains

It provides more opportunities to make a profit compared to day trading or trend trading. Smaller gains earned add up to significantly large annual returns.

• Easy portfolio management

Most short-term trading strategies need constant monitoring. A major advantage of swing trading is that you do not have to monitor your positions daily. You can periodically check them and take action when it calls for it. This makes it suitable for traders who have full-time jobs.

• Offers quick results

Unlike long-term traders who have to wait a few months to get results, you will get results in a significantly short time. This makes it possible to monitor and quickly adjust your strategy to optimize gains.

• Mitigates risk

The ability to minimize risks could arguably be the most significant advantage of swing trading. When the stop losses are smaller, you can order larger-sized positions.

You can also set wider stop losses. This helps reduce the number of positions that close prematurely.

• Lets you optimize longer trends

Traders using this strategy can take advantage of longer trends, making their analyses more relevant. Oftentimes, analyses carried out on larger time units are stronger and less vulnerable to false signals than shorter ones. And since such trades follow longer price swings, they are more likely to generate higher profits.

• Day Trading

Day trading, as the name suggests, is whereby you trade your positions within a few minutes or hours. In fact, day traders often open and close multiple trading positions in a single day as they focus solely on opportunities to compound returns fast.

On the downside, since day trading closes the same day, you make frequent trades resulting in high transaction costs. This can consume a large portion of your profit.

Also, even though day trading has the potential to make quick gains within a short span of time, it can deplete your funds just as fast. If you think that day trading typically has more potential for profit, then you should know that this only applies to small accounts. The bigger an account, the harder it becomes to use all capital on day trades.

• Swing Trading

Swing trading can last overnight or take a number of days, weeks or even months. Swing traders also get access to leverage or margin while day traders do not.

Additionally, swing trading is a more cost-efficient approach since it minimizes the effect of spreads. Though spreads are usually small amounts, they are charged with every trade and eventually add up. But for trades taking place over a span of time, spreads will not significantly impact profits.

On the downside, if there is a large price gap after several days or weeks, then the next session can open at a significantly different price from how it closed the previous day or week. This can result in a huge loss.

• T-line Trading

This trading strategy helps you decide the best time of entry or exit. For example, if the security closes above the T-line, it means that the price will climb, and if it closes below the T-line, it indicates that the price will go down.

• Fibonacci Retracement

This strategy makes use of lines that can determine the level of support or resistance in an area. These levels are associated with a percentage showing how much the price of a prior move has retraced. The Fibonacci Retracement levels are 78.6%, 61.8%, 38.2% and 23.6%. The indicator is instrumental because it can create levels between any two given price points.

• Japanese Candlesticks

Japanese Candlestick charts have been in use for centuries to read patterns and identify trading opportunities.

• Use technical analysis tools

As mentioned above, swing trading relies heavily on technical analysis. Familiarize yourself with the various tools available and identify the ones that work best for you. However, you should never trade based on a single technical tool. Having multiple indicators giving you the same message is usually a positive sign. Also, make sure you fully understand the indicators you’re using. Misinterpreting signals can quickly lead to losses.

• Know when to take your profits

If you are a beginner, it is advisable to take your profits after the line has hit so you do not incur losses.  An advanced swing trader may hold off for a while to make sure the market has not made a new high before he collects his profits.

• Set up your stop loss point

When you enter a swing trade, place your stop loss close to your entry point. This can help you get out of a position quickly in case things take an unexpected turn. You should raise your stop loss level consistently as the price increases, so you’re always locking in more profit in case the trend reverses.

• Align your trades with the overall market trend

Once you measure the primary and intermediate trends of the market, make decisions in harmony with these. Do not focus only on short-term trends as the overall success is based on the long-term context. Larger trends often reassert themselves sooner or later and impact short-term decisions.