Are you someone who has recently begun exploring the wide array of options that come with stock trading? If yes, you should gradually try to get a grip on swing trading as well. This is something that will help you progress a long way and shape you as a trader. To know the most common and viable swing trading strategies, keep reading.
Swing Trading – What is it?
Swing traders are those who are keen on earning profits on the price fluctuations of an asset within a very short time frame. They base all their decisions on market trends, utilizing technical analysis and fundamental analysis to recognize trends, patterns and changes in trends within a short frame of time.
Swing traders trade for a short span of time, like few days or few weeks, before a deal is finalized. In this type of trading, traders don’t follow market trends like day traders but they’re pretty quick in noticing shifts in the exit line and trend line. They do this by utilizing the best swing trading techniques.
A quick glance at swing trading strategies for beginners
All strategies in the setup of swing trading should have basically 3 key elements:
- Entry level: This is the point where a point is entered. This is decided by using technical indicators.
- Exit level: This is the preset target where the trade will be squared off post a profit.
- Stop loss: The preset point where the trader has to square off his position by tolerating a loss in case the market begins to move in a bearish or bullish direction.
Some Powerful Swing Trading Strategies
- PRICE ACTION STRATEGY
In this trading strategy, swing traders benefit from a chance that arises when the movement of the price of a stock in a particular direction breaks. This is a time when there is a new opportunity for a trade. Price action is noticing the reaction of the price at certain levels of resistance and support.
- MACD TREND FOLLOWING STRATEGY
This is one of those trading strategies that follow an approach that is similar to ‘go-with-the-flow. This is a trend-following indicator that informs the overall direction of the movement of stocks. This is a momentum indicator that speaks about the speed through which the trend is moving. MACD or Moving Average Convergence Divergence is one of the best trends and indicators of momentum.
- FIBONACCI RETRACEMENT STRATEGY
This is certainly one of the most widely used swing trading strategies. The term ‘Fibonacci Retracement’ is usually used in the field of technical analysis which refers to support levels. These levels show possible resistance and support areas using horizontal lines. Such levels are related with percentages like 23.6%, 38.2%, 61.8% and 78.6%. These are the main Fibonacci ratios used for predicting levels. Swing trading is one of the different options that traders use to earn money via the stock market within a short period of time. Just as any other trading, swing trading needs a lot of practice and discipline to make consistent profits.