4 Best Stocks For Swing trading

Swing trading involves analyzing and observing price movements, called swings, to make a profit on a particular stock or asset.

As exciting and easy as this may sound, mastering it and choosing the right stocks for swing trading can be challenging.

That is why we’ve decided to take a deeper look into this subject, telling you why swing trading is profitable and which swing trading stocks are the best to start mastering it.

What Makes Stocks for Swing Trading Profitable?

Swing trading stocks can be highly profitable, especially those with enough volatility and high volume to make short-term profits.

Unlike day trading, which brings small everyday profits or losses, swing trading allows a trader to purchase a stock for an extended period (a few days or months).

The extended purchase period, paired with highly volatile price movement, is why swing trading stocks provide the potential for high gains or losses.

Liquidity is another important factor that makes swing trading stocks profitable.

It indicates how quickly you can purchase or sell shares of a stock without causing a significant impact on its price.

The most liquid asset is cash because it is easily “bought and sold” and converted into other assets.

How to Choose Stocks for Swing Trading

Identifying some of the best swing trading stocks can be difficult if you don’t know where to start.

That is why we’ve included several tips to help you recognize profitable swing trading stocks.

Here’s what to pay attention to:

The liquidity and volume

We’ve already mentioned these, but let’s analyze them more thoroughly.

A stock's liquidity determines how easily a trader can exit a trade and minimize the loss. A trader can quickly exit the trading of high-liquid stocks because they often have lower bid-ask spreads.

Lower bid-ask spreads mean many buyers and sellers for a particular asset or stock, making it more liquid. As we’ve already said, cash is the most liquid asset, with the most buyers and sellers at any time.

Volume is another vital factor to consider when choosing swing trading stocks. It indicates two things related to stocks:

Tracking the volume of a stock can help you determine how its prices will behave in the future. If a stock's volume rises, it means there is buying pressure on that stock, increasing its cost.

Volatility

The volatility of a stock is directly related to its volume and liquidity.

A stock’s volatility is an essential indicator of abrupt price movement, helping you measure how much the stock’s prices will move in any given period. Bollinger bands are excellent indicators to predict stock price volatility, but ATR (Average True Range) indicators are also used.

Some of the best swing trading stocks have high volatility, with large and abrupt price movements and significantly greater profits. They also provide a more tolerable loss and stop window.

Repetitive patterns and performance

Stock performance and repetitive patterns are additional factors you should also consider.

When analyzing the performance of a stock, you’re basically comparing its movement trends to other stocks from the same sector. This helps you find the most promising store which has exceeded that sector’s expectations. To measure a stock’s performance, you have to analyze how it changes its price over time, how well it pays dividends, how it is affected by inflation, etc.

Repetitive patterns are directly related to a stock’s performance. In other words, stocks that perform higher often show repetitive patterns and prove to be more reliable for investing.

Traders use candlestick patterns or broader price movements to predict repetitive patterns a stock produces.

Best Beginner Stocks for Swing Trading

Some of the best stocks for beginner swing traders are:

Microsoft (MSFT) stock

The Microsoft Corporation stocks are some of the most preferable for swing trading, especially if you’re just entering the trading market.

Why are Microsoft (MSFT) stocks a good choice for swing trading?

For one thing, the company is considered one of the worldwide leaders in electronics, software, and technology, and its revenue is constantly on the rise.

Additionally, Microsoft gained even more traction in the past several years due to the COVID-19 pandemic, as internet collaboration and cloud-based services became essential to many businesses.

Volume-wise, more than 35 million shares were bought and sold daily in 2022. Microsoft stock has a constant upper trend, resulting in an incredible $168 billion revenue for the company in 2021.

Apple (AAPL) stock

Unlike Microsoft, Apple stock has almost three times the amount of trading volume, with over 100 million shares bought and sold daily in 2022.

Like Microsoft, Apple is also a technology giant, offering a broader range of products and services. It provides both software and hardware solutions, which in turn have a significant impact on the trend and volatility of its stock.

Surprisingly enough, the company’s positive and accelerated growth since the COVID-19 pandemic has made its stock preferable for most swing traders.

At the beginning of 2022, the company reached a market value of $3 trillion and continued its rising trend throughout the year.

Meta (META) stock

The former Facebook, and now Meta stock, is also a great beginner-friendly trading stock. More than 28 million shares of Meta’s stock have been bought and sold daily since January 2022, which indicates that the stock is liquid, on the rise, and profitable.

When talking about the company itself, it’s not strange that it has high popularity and a constantly rising trend among users. Facebook is one of the largest social media platforms in the world, and it reached a $1 trillion net worth in 2021.

Even though Meta’s stock is volatile and attracts swing traders, it’s reached its lowest price point this year compared to the previous five years.

Amazon (AMZN) stock

Amazon, the world’s largest online retailer, had its most prominent rise in stock prices during the COVID-19 pandemic.

Since the pandemic started globally in March 2020, the company’s stock has doubled its value and gained high volatility. Swing traders used that opportunity to invest and purchase Amazon shares, resulting in enormous profits.

Unfortunately, Amazon stock suffered a decline since the end of the pandemic, and its price reached the levels of where it was 3-4 years ago. That aside, Amazon stock is still an excellent choice for beginner swing traders to get a sense of the stock price movements on the market.

Netflix (NFLX) stock

Similarly to Amazon, Netflix also experienced a high stock value rise during the COVID-19 pandemic. This was because millions of people were on lockdown and used the streaming service to entertain themselves.

Because of the pandemic, Netflix stock doubled its value in October of 2021, from when it started its decline.

When we look at the stock on a monthly basis, there are clear signs of volatility, which is why swing traders keep a close eye on its movement.

Note that Netflix stock is among the most expensive ones, but it also shows a lot of promise for future growth and increased value.

Conclusion

As you can see, choosing the right stocks for swing trading is key to taking advantage and profiting from short-term price swings.

Now that you know which stocks to start with, we recommend you try FoolProof Options as your go-to trading platform. It has all the indicators, patterns, and notifications you need to start a successful swing trading journey.

Happy trading!