How to Swing Trade and Make Money from It
If you have been in the trading market for a while, you might have heard of swing trading. Swing trading is one of many ways to make money in this market. That said, it requires nerves of steel and only experienced traders can thrive in this environment. In this article, we will discuss how to swing trade.
- Swing Trading for Beginners – The Fundamentals
- How Swing Trading Works
- Swing Trade Stocks Forex And In Other Markets- A Glance At Basic Strategies
- Learn How to Swing Trade with AsiaForexMentor
Swing Trading for Beginners – The Fundamentals
If you are new to the game, let’s start with the basics. Swing trading is a trading style that makes use of technical analysis to capitalize on short- to medium-term price movement in an asset over a period of time. This can be a few days to several weeks. So, this is essentially intraday trading, except on a larger timescale. Similar to intraday trading, swing trading makes heavy use of technical analysis.
Fundamental analysis seeks to gauge the future potential of the underlying asset, usually stocks, which helps investors determine which stocks to put money in. For this, you try to find out about the company as much as possible and think about whether you want to stick with them long-term. In other words, you invest your money into a company’s stock and hope its value goes up. This kind of investment strategy is that simple.
However, for swing trading, you use technical analysis. Here, you do not consider the long-term potential of the asset. Traders do not really care which direction the stock goes in the market. What is important is whether there is a price movement at all. If you know that the price is moving, regardless of the direction, you can make money from that.
To achieve this, you would need to look at the current and historical price chart. Traders try to identify price trends and patterns and make use of various technical indicators to help them spot trends before they occur.
How swing trading works
Normally, swing trading involves taking a position over a single trading session. But you do not do so longer than weeks or a couple of months. So, this would be your general time frame. It straddles a comfortable medium between long-term investment and intra-day trading.
The goal of swing trading is to capitalize on price movement. How much movement depends on the individual trader. Some prefer the turbulent and volatile market while others prefer a calmer sea. Regardless, swing traders try to predict where an asset’s price is going to go next, then enter a position to profit off of it if such a movement materializes.
Therefore, successful swing traders are those who reliably predict the next price movement and manage to capitalize on that. Many swing traders operate on a risk/reward basis. They analyze the chart for the asset and they try to see where to open a position, what their profit goal is, and when should they pull out if the market moves against them.
The risk/reward ratio depends on the individual traders. Some want to make thrice the money they spent to open that position. Others shoot for twice or 50% of the reward. Find your risk/reward tolerance and stick to it.
Swing Trade Stocks, Forex, and in Other Markets – A Glance at Basic Strategies
So, with the basics out of the way, how does one swing trade? As always, you want to have a swing trading strategy before you go in. That means, knowing when to enter the market, what your profit goal is, and when to get out if the market moves against you. Here, we will discuss a few very basic strategies to help you understand how a swing trader interprets the market. Other than that, the platform does not matter when it comes to swing trading. Zerodha or any brokerage platform will do just fine, so long as they give you the features you need.
Also read: Algorithmic Trading Strategies
Support and Resistance
This is an incredibly popular strategy that does not involve the use of any indicator. All you need is a chart and a knack for pattern recognition. It is simple and easy to implement, which makes it a good strategy for beginners. As the name suggests, this strategy makes use of two market phenomena: support and resistance levels. What are they?
A support level is a price floor, meaning that the asset does not move below that price point. You can clearly see where this level is if you observe all the lowest prices in the market. They never go past a certain level, which is a good indication of the support level. So, if the asset price moves close to that area, it is a good time to go long or buy into the market as the price is likely to bounce back from that.
On the flip side, the resistance level is the price ceiling, so the asset price would not move above that level. Again, you can tell by looking at the highest prices on the chart. If you see the prices approaching the resistance level, it is a good time to sell or go short.
Keep in mind that breakouts do happen, which is when the prices break above the level to create new support and resistance levels. Usually, the old support level becomes the new resistance level and vice versa.
Also read: Futures Trading Strategies
For this strategy, you want to activate the Moving Average Convergence Divergence indicator, or MACD for short. It makes identifying trading opportunities a breeze for swing traders. It does so by looking for trend direction and reversals before they occur.
The indicator itself has two moving averages. You have your MACD line and the signal line. When these two lines cross, that means you should either buy or sell. If the MACD line crosses above the signal line, it may be a good time to go long. Conversely, if the signal line crosses over the MACD line, you should go short.
The strategy starts when the two lines converge and cross over. Traders would take the appropriate trading position and wait until the line crosses over once again. When that happens, they would close their position and exit the trade.
For example, suppose that you are looking at Apple stocks and you want to try out the MACD crossover strategy. You launch the MACD indicator, which is available in many charting applications, and you wait for the crossover. Suppose that the MACD line crosses above the signal line. Then, you go long. More often than not, the price would go up and you just sit there and wait until the MACD line goes below the signal line. By then, it is a good time to close your position and take home the profit.
Also read: 50 Pips A Day Forex Strategy
Learn How to Swing Trade with AsiaForexMentor
What we have covered here is not a comprehensive guide to swing trading, at least compared to any “How to Swing Trade” book or “How to Swing Trade” PDF file you can find on the internet. Just like any other aspect of the trading market, swing trading is complex and it will take quite some time to learn everything. Luckily, there are a ton of resources out there to help orient yourself. You can find many articles such as this on our website and others and all of them contain valuable information. A good place to start would be the “How to Swing Trade” Brian Pezim PDF book you can get on Amazon.
That said, reading can only get you so far and you will want to practice eventually. For this, you have demo accounts to provide a safe practice environment without putting your capital at risk. But even so, learning swing trading takes time, and only through experience can you start to make money reliably.
If you are short on time and want to get started as soon as possible, there is another alternative. That would be to enroll in a trading course. For that, AsiaForexMentor has you covered. We are often cited as the last stop for trading educations for many traders. In fact, we have trained many traders in the past, including those that work in major financial institutions and our course has won many awards for being one of the best out there.
What do we provide in our One Core program? We bring novice traders who do not know anything about trading up to speed with the tricks of the trade such as how to read charts, swing trading strategies, and more. Most importantly, you would learn about our trading system and how to implement it when you are trading. The best part about our trading system is the fact that you can implement it in virtually every market. That means, if you do not find success in swing trading in the forex market, you can still try it in the stock market for example.
But if you are not convinced or do not want to commit to a paid course, that is completely fine. You can grab our five-part course on the way out, completely for free. This little course is designed to help novice traders improve their skillset and every trader should go over it at least once. That alone should help you understand how to swing trade and more. When you understand the value we provide in our free course, you may see why our One Core program got so many awards.