Trading is a way most people opt for when seeking an extra income source. Swing trading is a trading style or technique that requires holding on to a position in a specific time range. The holding period makes this style different from day trading and trend trading.
Therefore, if you wonder how to learn swing trading, this article is just for you! Here, we will discuss the possibilities, strategies, pros, and cons, and the time needed for you to learn swing trade.
Later, you can expand your trading knowledge by choosing a quality swing trading book or trading movie.
Swing Trading Basics
The holding time range is the main obvious thing that separates swing trading from other trading styles/techniques. Day trading has a relatively short holding period, which is sometimes less than a day. On the other hand, trend trading has a much longer holding period that might get months, even a year.
Swing trading is right in the middle and aims to catch a potential price movement (swing). The holding periods in swing trading are short to medium, ranging from a couple of days to a few weeks. As a swing trader, you should enter a position, hold a couple of days or weeks, and exit with a profit.
The process sounds pretty simple, but it is a thing you should keep an eye on. Regardless of the trading style, you should always choose the right strategy to succeed.
Is swing trading good for beginners?
Swing trading is a good technique for beginners. It requires fewer skills, and most beginners can easily get “into it.” Moreover, this technique requires less time, so the trader should not be actively involved in the position scanning.
Getting deeper into swing trading might require some advanced skills and techniques. Some swing trading strategies might not be suitable for beginners since, in most cases, beginners get triggered by a false breakout and face losses. However, everything can be fixed with less emotional behavior and more self-discipline.
How long does it take to learn swing trading?
Once you start researching the trading market, you can come across stories saying you can get rich in a month. This is the point where most people make bad decisions.
Swing trading would not make you rich in a month. You need to invest four to six months in learning swing trading before actually using this technique.
Initially, you should master your knowledge in building a stable foundation in the market and understand technical and fundamental analysis. Then, learn risk management and trading strategies necessary for profiting.
Pros and Cons of Swing Trading
Pros
- Swing trading requires less commitment time and can be perfectly combined with a 9-to-5 job
- Swing trading might be highly profitable with proper management and strategy
- Greater funds flexibility and less loss
- The holding time is medium, neither too long nor too short
- A good technique even for beginners
Cons
- Requires high knowledge in technical analysis of stocks
- Poor trading knowledge increases the risk factor
- Exposure to overnight price gaps
Benefits of Swing Trading
- Swing traders may get higher returns in the medium and short term
- This trading style does not require active monitoring because the holding period is pretty long compared to day trading
- You don’t need to search and pick profitable stocks, but use technical analysis for stock investing
- Swing trading can be highly profitable if you use the right trading strategies and risk management
How to Learn Swing Trading
Open an account
This step is for beginners who still have no trading account.
If you have no trading account, now is the time to open one. A demo account is the best option if you are a beginner who wants to explore the market and practice in a risk-free environment.
If you think you’re ready to trade, you should open a live account. Then, you can research the market and stock prices and choose a stock you want to invest in.
Find swing trade stocks
When opting for swing trading, picking the right trading assets is important. Bad choices might be the cause of weakness in the trading strategy.
Therefore, keeping an eye on the economic calendar, using pattern-recognition scanning tools, and following the earning calendars is important. By monitoring the earning and economic calendars, you can easily determine the economy’s health and find trading opportunities and risks.
The most active-traded stocks are usually large-cap stocks. In the active market, large-cap stocks swing among broadly high and low points, where the trader “rides” the one-direction wave for a few days and switches to the opposite direction when the stock reverses.
However, these stocks are held by well-established and developed companies that choose safe investments.
Choose the right market
The trading market features three long-term swing trading trends:
- Bear market
- Bull market
- In-between.
Swing trading: Bear market
In swing trading, the bear market is the more difficult option. When the environment downtrends, the equity market prices will drop in the long term. In this case, we recommend abstaining from buying and holding security since its price is not likely to move in your direction.
Therefore, choosing a good strategy like shortening the trading period, holding more cash, or converting to options is best.
Swing trading: Bull market
The bull market is a simpler option. In this market, buying security and expecting profit in the short term are common things to happen. If you opt for this market, you should consider a few things.
Initially, you may have to pay more for securities since entry points are pretty high. Also, the bullet market is known for its bad habit formation. Many traders get triggered by security that looks like a winner, but it might not be.
Swing trading: In-between
In-between conditions might be best for swing trading. The transition between bear and bull markets makes the best position for swing trading. The In-between market features good volatility and safe conditions.
Choose the best trading strategy and tools
Trading strategies should help you identify opportunities and manage trades. Combining different tools will also help you discover the real stock potential.
Most swing traders rely on momentum indicators, moving averages, market sentiment measures, daily and weekly charts, and price range tools.
You decide which strategy to use in swing trading. Among the best and most popular strategies, we will mention the following:
- Trend catching strategy
- Breakout swing strategy
- Breakdown swing strategy
- Fading trading strategy.
Trend catching strategy
Swing traders exit the position when the profit target is reached. In this case, swing traders use the trend trading strategy concept to identify the direction of the trend and define the potential gains in the short term.
Using this strategy, you can catch a wave from its beginning and have more exit and entry “rooms.” However, the risk of facing a false breakout may occur.
Breakout swing strategy
Swing traders use the breakout swing strategy to take an early position in a potential uptrend. These traders aim to enter the trade the exact moment they see the desired volatility level.
This strategy might be good for you when you gain trading experience. Beginners might be triggered by a false breakout and make illogical moves that might lead to loss.
Breakdown swing strategy
The breakdown swing strategy is the opposite of the breakout swing strategy. In this case, the traders trade against the momentum. The trader opens a short position when the asset’s price breaks below the defined support level.
To get the desired effect of this strategy, you should check the oscillators and moving averages.
Fading trading strategy
The trader sells when the market is buying and buys when the market is selling. The point of this strategy is to bet on the reverse and profit from the corrections. This strategy is also effective in volatile markets like crypto.
The risk is high, and this strategy is mainly suitable for advanced traders. The fading trading strategy requires high self-discipline, which most beginners lack.
Learn More About Swing Trading
A simple guide is not enough on how to learn swing trading. As we mentioned, you may need a couple of months to master your swing trading skills.
Suppose you are interested in investing in your trading knowledge. In that case, we warmly recommend choosing a reliable assisting service like Foolproof, visiting a trading course, or spending some quality time reading a trading book or watching a trading movie.
If you are a book lover, we recommend reading some of the most popular swing trading books that reached their popularity in 2022:
- Swing Trading as a Part Time Job - by Brett Brown
- How to Swing Trade - by Brian Pezim
- Swing Trading for Beginners: 7 Golden Rules for Making a Full-Time Income - by Andrew Aziz and Brian Pezim
- The Master Swing Trader - by Alan Farley
Furthermore, you can try the Foolproof app and get the 14-day free trial. The service provides a full trade plan (price target, ticker, and estimated time to pan out), guidance on how to take proper risk management, full support via Telegram, and 3 trade alerts per week.
Conclusion
We hope this guide has helped you find a way how to learn swing trading. Trading is a complex topic and requires time until you master your trading skills.
Finding a good stock to invest in is just a tiny part of the whole process. Invest in your knowledge first. Take a book, choose a reliable trading service, visit a course, and learn from popular swing traders.