How To Do Swing Trading

People prefer different trading styles in the investment world, and each has its advantages and disadvantages. Swing trading is one of the most popular trading styles that traders prefer.

A swing trader aims to capitalize on short-term patterns and trends. If you also want to be a swing trader but don’t know how to start, you have come to the right place.

In this article about how to do swing trading, you can discover the steps you need to follow to start your trading journey. We will also discuss the best swing trading strategies to help you improve your chances of making a profit.

Moreover, we will share some important tips to help you trade the right way. So, without any further ado, let’s discuss how to start swing trading.

How to Start Swing Trading

Build your trading fund

Compared to day trading, the risk is less in swing trading, but it isn’t completely risk-free.

Traders don’t always make a profit, and risk is always involved in the stock market. So, before jumping into the market, you should decide how much you want to risk and build your trading fund.

If you have a trading fund, your day-to-day life will go smoothly even if you lose money in the market. However, if you use your emergency savings to fund your trading account and a few trades don’t go your way, you can get in trouble.

The best option is to calculate how much you can afford to lose and add the amount to your trading account. Ideally, beginners should use 2-5% of their monthly income for trading, and they can fund their accounts each month to have flexibility while trading. They can also reinvest their profits to have more money in their trading accounts.

Choose a suitable trading platform

Trading has become easier than ever, as people can do everything online. Nonetheless, you will have to find a trustworthy trading platform that suits your needs.

Trading fees, user interface, reliability, payment methods, deposit, and withdrawal time/limit, customer support, available tools, and personal preferences should be on your priority list while comparing different options.

Open a live trading account

Once you find a suitable platform, you will have to open a live trading account to start your trading journey. The application process will vary from platform to platform, and some platforms may take 24-48 hours to verify your details.

Beginners can also open a demo account to practice in a risk-free environment before risking their hard-earned money.

Fund your trading account

Once your trading account is set up and ready to use, you will have to deposit money using the available deposit methods. The payment options can vary depending on your chosen platform, but you will likely have a few options.

Choose the assets you want to trade

You can start trading after depositing money in your trading account, but you will have to choose the right assets. Research and technical analysis are important parts of swing trading. The following factors should be a part of your research:

Build your entry/exit strategy and buy the desired asset

Before risking your hard-earned money, you should build your entry and exit strategy. You should find an entry point and be clear about your target price before buying an asset. Once you are clear about these details, you can buy the asset you want.

You should always do risk management to reduce the chances of losing money. Stop loss, profit target, and risk management tools/techniques should be a part of your strategy.

Monitor your position

Swing trading is less demanding than day trading, but it doesn’t mean you won’t have to monitor your positions. You should keep checking chart patterns and be aware of market sentiment and direction after buying an asset. Since overnight and weekend market risks are also involved in swing trading, you should stay careful.

Close the trade

Depending on your swing trading strategy, you should close the trade when the asset hits the target price. After closing the trade, you can open a new position and repeat the process. You can also open multiple positions together, but make sure to monitor all of them.

So, these are the simple steps you will have to follow to start swing trading. It’s easy to start, and you can do it without professional training.

Nevertheless, you shouldn’t start trading without a clue, and it’s important to have a solid strategy to improve the chances of making a profit while reducing the risk.

In the next section of this how to swing trading guide, we will discuss the best strategies you can choose.

Best Swing Trading Strategies

Breakout swing strategy

Generally, breakouts are observed when an asset’s price moves beyond a certain price range (resistance). Traders following this strategy aim to open a long position at the beginning of an uptrend. Taking a position early in an uptrend allows traders to book a good profit before a reversal.

10-day and 20-day SMA

It’s a popular and effective strategy, and beginners can also try it, as it’s easy to execute. You will need a basic understanding of simple moving averages (SMAs) to successfully execute this strategy.

Traders following this strategy apply two SMAs (10-day and 20-day) to the chart. A buy signal is generated when the 10-day SMA crosses above the 20-day SMA. A sell signal is generated when the 10-day SMA crosses below the 20-day SMA.

Channel trading

Channel trading is an excellent strategy, but you will have to identify stocks trading within a channel to execute it. Individuals following the channel trading strategy have to trade with the trend.

When the price is in a downtrend, you should look for sell positions; when it’s in an uptrend, you should look for entry points.

Pullback trading

You should know that stock prices don’t follow a unidirectional path, and fluctuations occur even when a stock is displaying a strong trend. A small upward movement in an asset’s downtrend and a small downward movement in an asset’s uptrend is called a pullback.

Traders try to exploit these small opposite movements in an asset’s price and find entry points. However, it’s important to know that pullbacks don’t last as long as reversals do, and you should build your exit strategy accordingly.

So, these are the best strategies you can follow as a swing trader. All these strategies are equally effective in general, but some may be more helpful in certain market conditions. Therefore, you should choose a strategy that suits your trading style and goals.

Important Tips for Swing Traders

Risk a fixed percentage of your funds per trade

Beginners often risk a huge portion of their funds in a trade and end up facing the consequences. You should always risk only a fixed percentage of your funds per trade.

This strategy will help you make a comeback if you lose money in a few trades in a row. Risking 2-5% of your funds per trade is an ideal option; however, you can go a little higher or lower depending upon the risk-to-reward ratio.

Set realistic goals

It’s important to have a goal, and as a swing trader, you should have both short-term and long-term goals. However, you should set realistic goals, and you shouldn’t expect to get 500% returns in a single trading session.

Short-term trading styles, such as day trading and swing trading, generally involve small profits per trade, and these small profits add up over a period.

Always stay calm and don’t panic

You will likely face many challenges throughout your trading journey. Some traders may not go your way, and market conditions can also leave you worried.

Nonetheless, you should stay calm in every situation, and traders often make wrong decisions when they panic. If you have a solid plan and keep learning from your mistakes, you can deal with every problem that comes your way.

Is Swing Trading Profitable?

Swing trading, without a doubt, can be a profitable trading style. Unlike long-term investors, swing traders can also make profits in bad market conditions, aiming to capitalize on short-term trends.

Price swings and short-term upward movements can also be seen in bad market conditions. However, swing traders can also lose money, which can be significant if you jump into the market with no knowledge and plan.

If you have read this how to swing trading guide carefully until now, you will know how to trade the right way and minimize risks. Swing traders can make profits quickly without getting their money stuck in one asset for extended periods, and it’s one of the biggest reasons for the popularity of this trading style.

When we talk about trading options and styles, options trading also comes into our minds, as it’s popular among traders. Options trading can be challenging for people who don’t have experience in the field, and they can benefit from an options-picking service.

FoolProof is an ideal option for beginners and traders who can’t invest much time in the research part. You can get a fairly-priced monthly subscription and expect at least 3 trade alerts every week.

More about Foolproof Options

Members get a full trade plan, guidance, excellent customer support, a 14-day trial pack, and a 200% money-back guarantee.

With 25+ years of trading experience, their experts have managed to outmatch the competitors, and the team has made Foolproof a leading player in the industry.

Conclusion

We hope you have found our how to swing trading guide helpful and clarified all your doubts. Swing trading is popular and can be profitable, but you will have to stay active and make the right moves to end up on the right side.

You can also combine your 9-to-5 job with swing trading if you don’t want to be a full-time trader, as it’s a less demanding profession.

Picking the right asset, finding the right entry point, choosing the right target price, and sticking to the strategy are all things you need to do. The stock market presents many opportunities to swing traders, and the ones who grab them become successful.

Open your live trading account today and start swing trading!