The best swing trading strategies focus on taking smaller gains in short term trends and cutting losses faster. The gains may be smaller, but done consistently over time they can compound into exceptional yearly returns. Swing Trading positions are often held a few days to a few weeks, but may be held longer.
Swing trading is predicting the market’s next move, and asking what’s the most likely outcome. For example, if a market trend is broken and has a sharp move down, the most powerful trade to make is to market the first rally. This is because the most likely event is for the market to make a retest of the new low and a high chance for it reverse direction.
The main objective of every trade is to minimize risk instead of maximize profit.
Positions are managed based on the market’s behavior after we have made our trade. We can not really predict the future of a stock. For example, when we are entering a trade, we do not know whether it is going to go in an up trend or down trend. We’re trying to get a”head-start” in the right direction with a opportunity to issue a tight stop. That is why below we are going to look into three of the best swing trading strategies so you can have a “head-ups” for a glimpse of a future trend in a stock.
Trends can have updraws or drawdowns. Swing trading depends upon NOT riding out emotions or giving up gains already won. Trades should be executed either at the direction of price movement or as the cost reverses. Trailing stops will lock any profits obtained.
Swing Trading should take advantage of price action, higher volume, and liquidity. All of the patterns mention below are intended to capture profits in busy market conditions; furthermore, show how to recognize the gap between trends and when are the best entry and exit points in buying and selling.
The strongest pattern in our best swing trading strategies is trading on tests of previous highs or lows.
For example, this chart showing “Double Stop Point”
This trade entry point is a great place to enter a trad with the least amount of risk of loss. The stock can either move slightly higher or lower, but support can’t be established until there is a test in having that second stop. That why it is called a double stop point. This pattern is one of our best swing trading strategies to follow in giving you the best chances of an uptrend in the market.
In looking at the “Double Stop Point,” This stock broke out displayed in the horizontal line from a double bottom which are circled in blue. A good point of entry is to buy this stock on the first pullback which is the arrow.
The second kind of trade is called, “Single Stop Point.”
This is “purchasing a higher low” in a sequence of higher lows and higher highs (or selling a lower high at a series of lower lows and lower highs). In cases like this, there’ll only be a single stop point, but because the transaction is entered at the direction of the prevailing trend, no evaluation ought to be required.
In looking at the “single stop point” image, look at how the pattern has three numbers of a low (1), lower low (2), then a higher low (3) This is one of the many classic swing trading strategies. A good entry point to buy is (3) which is the third candlestick.
The final and third swing trading pattern is “Climax Stop Point.”
The best climax trades will happen in a high volatility environment, and following the trend has already reversed. You have to see the”climax stop point” already set up before you put in your position. If your entry is correct, the market should proceed favorably almost instantly.
Swing trading is learning how to read this charts and putting them into practice. If you are not comfortable using “real money” you can always do paper trades. Practicing these three best swing trading strategies, will help make maximum profits by putting these swing trading techniques into play.
As you can see in the two charts above, the stock TZOO has reach the following red flags for a climax top point created.
- Ten of the last 13 days have been up days
- A 68% gain over the previous 13 trading days plus a 100% move within the last month. Stock is up 900%+ since March 2009
- The biggest daily and weekly volume of the entire run
- A brand new high intraday using a close that resulted in a reduction (Day of composing: New high with a change to shut 3.69% on quantity 485 percent larger than average)
- TZOO is trading more than 130% over its 200-day moving average
Here are some essential rules to follow in swing trading:
• Remain in one-time frame! Yes, it’s essential to know about the big picture, but it shouldn’t change where you get into or out of a transaction or how you handle it. Do not turn short term scalps to”big picture” trades.
• When in doubt, get out! If the market goes dull and silent after you enter a trade and makes no progress in the direction of your entry, don’t wait until your stop is hit. Just get out! Seek a more active market or greater trading opportunity.
• Do not trade in silent, dull markets. Dow, Livermore, Rhea, Taylor, Gann-all the greats say this over and over. There has to be activity and liquidity so as to trade profitably.
• Do not carry losing positions. Exit and try entering a more positive level the following day.
• If the market offers you a windfall gain on a trade, lock it! Take profits in half or all the position. Trail a very tight stop loss on any balance!
• Finally, bear in mind that both in short-term trading and trading long term, the supply of winners are few. A lot of a month’s profits might come from just two or three significant trades. Most of the time the person profits might appear modest, but more importantly, the losses are modest, too.
It’s crucially important to lock in” the best deals. Be defensive and do not give back gains when your trading!