A Game Plan For Swing Trading

Swing Trading is the new normal in the Trading World!

Swing trading provides you with an opportunity to earn quick money. But, at the same time, you need patience and proper analytical skills to choose a trade.

Swing trading is a trading method where the investor holds a position for more than one day. Usually, they stay in the place for a few days to several weeks.

Technically, swing trading is based on the idea of making a small series of profits that adds up to a significant profit. For instance, other traders may wait for six months to earn 27% profit, while a swing trader may make 6% weekly profit and overachieve in the long run.

The first key to thriving swing trading is selecting the right stocks with proper training, experience, and decision-making skills.

Irrespective, you are a bull or a bear trader, you can utilise a swing trading strategy as a part of your investment strategy. With a fundamental and technical analysis collaboration, any trader can successfully earn maximum returns.

Let's learn in detail about the swing trading strategies in bull and bear markets. 

Coaching Strategies in The Bull Market

• 1. Play The Uptrend

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Trending and profitable stocks rarely move in a straight line. Instead, they often form a staircase pattern, where trades might go up for several days and then move downward for a few days.

Each subsequent peak and trough in an uptrend is more elevated than earlier. Hence, when numerous zigzag patterns occur repetitively, stocks are on an uptrend.

A bullish swing trader observes the initial upward price movements of the market trends, followed by the reversal trend. These reversals or pullbacks are known as counter-trends.

• 2. Capture Gains on the Uptrends

No one is confident about how long the counter-trends will last in downtrends. Hence, a bullish swing trader considers making a trade only after the stock appears to rise again.

A bullish swing trader can isolate the counter-trend move to make an entry point. An entry point is a price they pay to purchase an investment. Usually, when the stock trades higher than the counter-trends high, a trader should make their entry.

Next, find the highest point of the uptrend. That point will be your profit target. If the price rises to that level, make sure to sell a small portion of your position to make gains. 

To exit, the trader should find the counter-trends lowest point in the upcoming trends. However, if the trade price falls below the pullbacks, the trader should sell their position to limit the losses.

• 3. Summary of Bull Market Trends

Usually, the difference between the profit target and entry points of the bullish trend is the trade rewards. Also, the difference between the exit and entry points is the approximate risks.

Always compare the numbers with the reward-to-risk ratio to analyse your swing trading worth it. It states that your rewards must be twice as much as your potential losses. So mathematically, if your balance is higher than 2:1, then your trade was good.

Coaching Strategies in The Bear Market

• 1. Play the Downtrend

A downtrend refers to the pricing actions of the trades that move lower over a period. Technically, a downtrend is the opposite of an uptrend.

A downtrend moves in a zigzag or staircase pattern but towards the declining direction. Here, when the price pattern reverses temporarily towards the uptrend, those pointers are the counter-trends.

• 2. Capture Gains Towards The Downside

It's difficult to predict the timing that bears rally or counter-trends will last. Hence, a bearish swing trader enters a swing trade only when the stock performance continues towards the downside.

Here, the profit target is the lowest price of the current downtrends. When the stock reaches this price, you can consider selling some of your positions to earn potential gains. 

A trader should consider entering the bearish position when the trade's head is lower than the previous counter trend's low. In a bearish swing market, the stop-out point is the highest price of current counter-trends. 

• 3. Summary of Bear Market Trends

In bull market investing, we should consider the reward-risk ratio to evaluate the profit of swing trading. Likewise, a swing trader should compare the bear market's entry point, profit target, and exit points to meet their desired goals.

Bear swing traders can follow the footsteps of a reward-to-risk ratio of two-to-one and compare with yours. Mathematically, if your balance is more than 2:1, you are doing great!

Final Thoughts: Why Making Swing Trading Strategy is Important?

Anxious traders make bad decisions and invariably lose money. According to various sources, nearly 95% of people who try swing trading lose money, while the rest makes 7% weekly gains and outperform other traders in the long run.

Swing trading aims to identify an overall market trend and capture massive gains. A swing trader consistently monitors a particular trade's 44-moving average price patterns. As swing trading is less time-intensive, they collaboratively use the technical and fundamental analysis to track chart-price movements periodically.

A swing trader is not looking to make small gains or invest their earnings for long-term goals. Instead, they are in the market to create one overall good trade and attain maximum profit in a week or two. Hence, keeping swing trading's objective in mind, a swing trader should develop a strategy different from traditional investment tactics.

If you have any queries about swing trading or any other trading instruments, contact us. We will be happy to guide you.