Swing trading strategies that work
There are different swing trading strategies that investors use today in the stock market. However, what is swing trading? And can this style of trading help you generate consistent returns?
It is important to define swing trading before diving into the wide range of strategies. So what is swing trading?
Swing trading occurs when investors hold their position for one or more days to take advantage of price fluctuations. The goal is to capture short-term gains in just a few weeks. And wait time is the name of the game. It’s basically the middle ground between day trading and long term investing.
But how do swing traders determine how long to hold a stock? This is where different swing trading strategies come into play.
For example, many swing traders will design plans around specific patterns. Some popular models are …
- Moving average crossovers
- Cups and handles patterns
- Head and shoulders patterns
- Flags and triangles
- Key turning candlesticks.
Each of these indicators requires data analysis. Moreover, the intention is to use these indicators to predict positive movements in stock prices over a short period of time. As a result, swing traders can earn up to 3% of their total account balance each month, according to The Balance.
The most widely used swing trading strategies include moving average crosses, cup and grip patterns, and head and shoulder patterns.
Moving averages are usually the first indicator swing traders will use. And they can be used in a number of ways, for example to indicate potential turning points in stock prices.
A cup-and-handle pattern, on the other hand, is an indicator you can recognize on stock price charts. And as you might expect, the design resembles a mug with a handle on the graphic.
The cup is shaped like a “U” while the handle moves slightly downward. This is a bullish strategy that can indicate a downtrend in a security due to selling pressure.
And finally, the head and shoulders pattern is a graphical indicator of stock prices with three distinctive peaks. Each of these peaks creates a baseline. And traders use this baseline to predict bullish to bearish trend reversals in stocks.
These are the most popular swing trading strategies used by investors today. However, there are many other indicators that swing traders will analyze before investing in a specific stock.
Each of these indicators requires in-depth knowledge of the stock market and investing. Therefore, it is important to do your research before becoming a swing trader.
Swing trading can generate stable returns if you compile your data correctly and do your research. But there is always a risk when investing in the stock market.
Unlike day trading, you keep your stock picks at least overnight. This alone exposes you to more risk due to the volatility of the market.
But you can stay ahead of the trends by signing up to Trade of the dayFREE e-letter below. This daily email newsletter provides expert analysis and stock picks that can improve your portfolio. You can read more about the best swing trading strategies that investors use to predict stock price movements.
Read more: Introduction to swing trading options: call and put options
About Corey Mann
Corey Mann is the Content Manager for Investment U. He has over 10 years of experience as a journalist and content creator. Since 2012, Corey’s work has been featured in major publications such as The Virginian-Pilot, The Washington Post, CNN, MSNBC and more. When Corey isn’t focusing on Investment U, he enjoys traveling with his wife, going to Yankees games, and spending time with his family.