As a swing trader, rolling with the swings of your investments, it’s important that you have a set of tried-and-true swing trading strategies. Playing on the upswing and the downswing, your trades will last anywhere from one day to several weeks (and possibly longer if the trade is working). Swing traders generally trade the daily charts, and they often trade daily candlestick charts as well. Some swing traders will use short time-frame charts to choose the perfect entry or exit, and some will employ long time-frame charts (i.e., weekly or monthly charts) to assess the general long-term sentiment surrounding the investment.
Just as people differ, swing trading strategies differ—there isn’t one “correct” way to go about it. Every trader has his or her preferred methods and strategies. If you’re trying to decide which techniques will work best for your investments, consider the following swing trading strategies.
Swing Trading Strategies
- Follow the price action and use technical analysis. These techniques are standard for most all swing traders. Your analysis will help you determine which stock or ETF to trade.
- Don’t get caught up in the company. Unlike a lot of long-term investors, swing traders typically aren’t concerned with the fundamentals of a stock. They don’t spend time getting to know the company, learning what the company does, who owns the company, who the CEO is, the intrinsic value, the news, etc. However, earnings reports will still be important and remember that the news does affect investor sentiment and can change the price action.
- Work with the trends. Swing traders traditionally choose to follow the trends and embrace them (i.e., a bull trend bar in a bull market and a bear trend bar in a downward market).
- Work against the trends. Most swing traders work with the trends of their stocks, but you could also trade the counter trend (sometimes known as “fading”). Take a bearish position during an uptrend’s swing high and take a bullish position during a downtrend’s swing low.
- Use Japanese candlesticks. Many traders find that candlestick charts are easier to understand and interpret than traditional bar charts. Use the charts to identify where there is buying pressure and where there is selling pressure (and how intense the pressure is) and then apply that information to your investments.
- Use a T-Line trading strategy. Identify the T-Line and use it to make informed trading decisions. If a stock closes above the T-Line, there is a greater probability price will continue to rise. Likewise in a downtrend, if a stock closes below the T-Line, it will probably continue to fall. This technique works well with most trading plans and investment strategies.
There is also the Volume Spike strategy, Gap Re-Mount strategy, and the Rubber Band strategy, amongst others. Through analysis, experience, and trial and error, you can figure out which swing trading strategies work best for you. Whether T-Line trading, Japanese candlesticks, working for or against the trends, or a mix of all of the above, there is sure to be a swing trading strategy that you find useful, exciting, and efficient.