Swing Trading 2021: How it Works | Beginners Guide

Swing Trading

Table of Contents

Swing trading is a meat-and-potatoes type of short-term market speculation which involves positions being held for longer than a single day. With the aid of swing trading, you may trade in forex, futures, stocks, options, ETFs and cryptocurrency. We mean to take an in-depth look at the meaning of swing trading, besides some top strategy techniques and tips. The advantages and drawbacks of being a swing trader will also be discussed, in addition to indicators and daily charts, prior to summing up with some important takeaway points. By the end of ‘Swing trading strategies: Beginners’ guide’, you will be ready to hit the ground running!

What is a Swing Trader?

The direct definition for beginners is that a swing trader aims to capture gains by holding an instrument anywhere from overnight to several weeks. As per training guides, the aim is to cash in on a greater price shift than is feasible in a time frame that’s intraday. But since you follow a more comprehensive price range and shift, you need calculated position sizing so you can cut down downside risk.

To enable this, traders use technical analysis to identify instruments with short-term price momentum. This implies following the fundamentals and principles of price action and trends.

Individuals usually undertake a swing trader’s setups and methods, and not major institutions. large enterprises usually trade in sizes too big to enter and exit securities with speed. There’s no doubt that individual traders can cash in on short-term price fluctuations.

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Swing Trading: Advantages

There are several merits to swing trading, including:

  • Application – Swing trading can be productive in a lengthy list of markets and instruments. For instance, you can speculate on the latest altcoins, such as bitcoin (BTC), ethereum (ETH) and litecoin (LTC). Conversely, you can use swing trading with standard options.
  • Resources – There are a plethora of online resources to help you become a success. You have Ebooks, video training courses, apps, tutorial classes. All can supply ideas for forex strategies, general trade plans and pattern-identifying top tips. 
  • Tools – You can swing trade using candlesticks and other techniques on any number of platforms, especially MetaTrader. There is also the choice of employing automated bots and expert advisor software (EAs). Used properly, these may permit you to execute far more swing trades than you ever could on your own.
  • Mindset – As success stories attest, if you have the characteristics needed to effectively day trade, you may well have those demanded by swing trading. For instance, are you calm, collected, composed? Do you find yourself comfortable with having big stop losses? Are you content with fewer trades while being thorough with the few setups you do make? If yes, you may already have the prerequisites of a thriving swing trader.

Risk Management

Before you quit your job and start swing trading for a living, there are certain disadvantages you must be aware of, encompassing:

  • Market risk – you can doubtlessly lose money. Regardless of the fact that some have made it look easy, any mistakes will be hit below the belt. That’s inevitable since lessons are only learnt the hard way. Besides, trading on margin and using leverage could let you lighten by more than your initial investment.
  • Time – Swing trading isn’t the sort of trading where you can enter your position and just check it a week or so later. It is live trading, and the strategies that give results demand continual monitoring. This translates as juggling swing trading with a full-time job would be more than challenging.
  • Taxes – Swing trading does not necessarily make you tax exempt. In fact, in the US, for instance, you may get entangled in pattern day trader laws. So, ascertain if you can satisfy any obligations in your financial system first.
  • Risk management – If you’re interested in penny stocks or using an algorithm service, failure to implement an effective risk and money management strategy would cost you dearly. As accomplished trader Harry Lite said, “Throughout my financial career, I have continually witnessed examples of other people that I have known being ruined by a failure to respect risk. If you don’t take a hard look at risk, it will take you.”
  • Psychology – Do you fancy a peppy, vigorous trade environment? Are you agog with a need to be sure whether you’re right or wrong right away? If so, you may lack the mindset needed to become a millionaire swing trading master. These are by no account the only set rules of swing trading. Nonetheless, you may use the above as a roster to see if your dreams of millions are already looking hemmed-in.

Day Trading vs Swing Trading

The main variation is the holding time of a position. Day trading stands for closing out positions before the end of the market day. Nevertheless, as chart patterns will establish when you swing trade, you tackle the risk of overnight gaps coming up or down against your position. Consequently, when swing trading, you often take a smaller position size relative to if you were day trading, as intraday traders more often than not utilise leverage to take larger position sizes. Swing traders can cash in on up to 50% overnight margin. But veteran traders point out, swing trading on margin can be apocalyptically risky, especially if margin calls occur. So swing trading or day trading isn’t so much concerned with what you want to trade, be it commodities, such as oil futures or stocks from the DAX 30. Rather, it’s just the time. So while day traders will scrutinise 4 hourly and daily charts, the swing trader will be more involved with multi-day charts and candlestick patterns. Truth to tell, some of the most popular embrace:

  • Moving average crossovers
  • Shooting stars
  • Head and shoulders patterns
  • Cup-and-handle patterns
  • Double bottoms
  • Triangles
  • Flags

One final day variance in swing trading vs scalping and day trading is the deployment of stop-loss strategies. With swing trading, stop-losses are normally sufficiently expansive to equal the proportionate profit target.

 Swing Trading

What Stocks to Swing Trade

One indubitable truism of swing trading is that you need to pick the right securities. In terms of stocks, for instance, large-cap stocks often have the levels of volume and volatility you are looking for. In addition, these stocks will generally swing between higher highs and serious lows. You can swing in one direction for several days, and then when you notice reversal patterns, you can switch to the trade’s opposite side. Chancing upon the right stock picks is one of the rudiments of a swing strategy. You will need to choose a platform with effective screeners and scanners. It’s pointless having the best strategy if you’re speculating on the wrong stocks.

The Right Market                           

Swing trading can be especially challenging in the two market extremes, the bear market environment or the raging bull market. Here, you will find that even highly active stocks will not display the same up-and-down oscillations relative to when indices are stable for weeks. Instead, in a bear or bull market, you will find that momentum will as a rule carry stocks for an important period in a single direction. This can stress that the best entry point and strategy is on the basis of the longer-term trend.

Essentially, when the markets aren’t heading anywhere, you have the ideal swing trading environment. For instance, if you were to trade on the DAX 30, you would wait for the index to appreciate for a couple of days, decline for a couple of days and then echo the pattern. So even though after a few months, your stock may be close to initial levels, you will have had several opportunities to cash in on short-term fluctuations.

Using the Exponential Moving Average

A swing trading academy will orientate you with respect to gaps, alerts, pivot points and technical indicators. In all likelihood, one of the main principles they will introduce to you is the exponential moving average (EMA).

This is just an avatar of the simple moving average but with a jacked-up focus on the latest data points. Used properly it can help you identify trend signals besides entry and exit points swifter than a simple moving average can. Essentially, you can utilise the EMA crossover to construct your entry and exit strategy.


An EMA system is no-nonsense and can play a vital role in swing trading strategies for beginners. You can deploy the nine-, 13- and 50-period EMAs. Your bullish crossover will show up at the point, where after starting below, the price will breach above the moving averages. This foreshadows that a reversal and an uptrend may be imminent.

Then if your nine-period EMA is greater than the 13-period EMA, you are alerted to a long entry. The 13-period EMA simply has to be above the 50-period EMA or pass above it. Obversely, a bearish crossover occurs if an asset’s price plummets below the EMAs. This adumbrates a potential trend reversal. You can then use this to sync your exit from a long position. So if the nine-period EMA breaks the 13-period EMA, this notifies you as to a short entry or the necessity to exit a long position. Be that as it may, the 13-period EMA has to be below the 50-period EMA or cross below. Utilise the EMA judiciously, with the right time frames and the right security in your crosshairs, and there you have an efficient swing strategy.

Volume weighted moving averages

This indicator is meant to give the average price of a stock (so far) for the trading day, based on price moves and volume. It’s an intra-day indicator, starting with the day’s first period (based on the chart time frame chosen) and ending with the last. The larger the time frame of candles, the less valuable the indicator becomes.

Swing Trading Psychology 

You may download a host of podcasts, audiobooks and PDFs that will give you instances of swing trading, rules to be mindful of and Heiken-Ashi charts to the plot. Still, they often won’t tell you how to react when your swing trading strategy doesn’t deliver.

Having said that, you still ought to consider the following three tips:

  1. Have a plan and adhere to it – There will be highs and lows, for that is the natural for buying and selling. However, do not let your emotions confuse you. Determining when to sell can swiftly become an emotional decision when you have your whole weeks’ profits returns. So, devise a strategy and then stick to it scrupulously.
  2. Fight fear by reducing risk – Everyone’s risk appetite is different. So decide which risk parameters suit you best. For instance, you may want to start by not risking in excess of 2% of your account size on a single trade. Unfortunately, you can not learn this from a teacher. Only practice will teach you where your personal limits lie.
  3. Plan long-term – Too many swing traders agonise over the last trade or the next. Don’t break into a sweat if you just lost on gold futures. Rather, consider your long-term profit percentage and calculator. As Bruce Kovner quipped, “If you personalise losses, you can’t trade.”

Swing Trading Best Tips

Even some of the trending forex books neglect some of the best tips and swing trading secrets, embracing:

  • Utilising the news – Markets are remorselessly moving in reaction to news events. Many resources, like Yahoo Finance and CNBC will render market analysis and commentary, deploying volume, price action and weekly charts. Used judiciously, the news could aid you to highlight possible options and dividend stocks to be on your toes about. It could also help you design your entries and exits.
  • Never cease learning – As Paul Tudor Jones sagely said: “The secret to being successful from a trading perspective is to have an indefatigable and an undying and unquenchable thirst for information and knowledge.” Consequently, a wealth of information can be availed of to help you come up with innovative cryptocurrency and forex strategies. Video tutorials, for instance, can help you enter Gann techniques and how to start deploying weekly deep-in-the-money options. They can also orientate you through indicators for your MT4 platform and the establishing of daily stock alerts.
  • Getting ahold of the right broker & exchange – Everyone has different goals, so while one crypto swing trader may be profit best on Gdax or Binance, a highly active forex swing trader may be mulling ETFinance. Note they are more than mere sites to consider quotes and exchange securities. They can aid you to build a diverse watchlist, portfolio, and much else besides.
  • The inescapable Journal – Keeping an Excel journal may prove invaluable. Simply jot down price, date, position size and a justification for entry and exit points. This could help you understand why your breakouts plan for currency pairs does not give outcomes on weekly charts, for instance.


 Swing Trading

How Much can you earn?

Swing trading returns depend wholly on the trader. For instance, consider leveraged ETFs vs stocks. Some will generate generous returns with the former whilst failing woefully with the latter, notwithstanding both trades being comparatively similar.

It will also partly be contingent upon the approach you take. For example, some swing traders will fancy MACD indicators while others are comfortable with an NMA system. Just as some will swear by candlestick charting with support and resistance levels, while some will faithfully trade on the news.

The key is to discover a strategy that gives you results and sits well with your schedule. 

Best Swing Trading Books

There are only a handful of books specifically on swing trading, but they do exist – and more to the point, some of the best trading books advise on all trading, including swing trading:

  • Mastering The Trade (John F Carter). Nothing is beyond experience, and John F Carter offers insights as a genuine swing trader. 
  • Come Into My Trading Room (Dr Alexander Elder). This book is not about swing trading per se, but it does bring you face to face with fundamental trading principles that every trader ought to apply – not excluding swing traders.
  • Trade Your Way To Financial Freedom (Dr Van K Tharp). Still, not about swing trading precisely– rather about managing risk, and viewing your whole trading activity through the perspective of managed risk.

This guidance is crucial for shorter-term, high-frequency trade styles, like trading swings.

Breakout trading

Breakout trading is a potential trading opportunity that takes place when an asset’s price moves above a resistance level or moves below a support level on appreciating volume.

The first step in breakout trading is to pinpoint current price trend patterns, besides support and resistance levels, in order to plan potential entry and exit points.

Once you’ve acted on a breakout strategy, know when to check your advance and re-evaluate the situation if the breakout peters out.

The Right Market

In either market pole, the bear market environment or the raging bull market, swing trading shows itself to be a somewhat unusual challenge than in a market between these two opposites. In these polarities, even the most active stocks will not demonstrate the same up-and-down oscillations as when indexes are comparatively stable for a few weeks or months.

In a bear market/bull market, momentum will , as a rule, carry stocks for an extended period of time in one direction only, thereby confirming that the best strategy is to trade based on the longer-term directional trend.

Therefore, the swing trader is best positioned when markets are going nowhere – when indexes rise for a couple of days, then decline for the next few days, only to repeat the same general pattern again and again.

A couple of months might pass with significant stocks and indexes roughly at the same place as their original levels. Still, the swing trader has had many opportunities to catch the short-term movements up and down (sometimes within a channel).

Of course, the problem with both swing and long-term trend trading is that success is based on correctly identifying what type of market is currently being experienced. For example, trend trading would have been the ideal strategy for the bull market of the last half of the 1990s, while swing trading probably would have been best for 2000 and 2001.

Swing trading is one of the best trading styles for beginning traders to get their feet wet. However, it still renders significant profit possibilities for intermediate and advanced traders. Swing traders get sufficient feedback on their trades after a couple of days to keep them motivated, but their long and short positions of several days are of the duration that does not lead to distraction.

By contrast, trend trading offers more significant profit potential if a trader can catch a major market trend of weeks or months. Still, few are the traders with sufficient phlegm to hold a position that long without getting distracted. Conversely, trading dozens of stocks per day (day trading) may just prove too white-knuckle of a ride for some, making swing trading the perfect medium between the extremes.


There’s a good number of rewarding swing trading strategies. Many of the basic, reconstructible patterns like trend pullbacks and support/resistance holding have a promise of a positive outcome. The problem lies with the placement of targets and stops, risk management and trading psychology. With Global Trade ATF, put your worries to rest, and get that swing trading in full swing!

Risk Investment Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please read the complete Risk Disclosure Statement, which gives you a more detailed explanation of the risks involved.                                                    



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