How to Swing Trade Stocks With Less Exposure & More Profit | A Step-by-Step Guide

Updated: 16 Jun 2022

When trading in the stock market, many stock investors are thought to have their own identities. In this context, identity means that they are certain of their stock investing goals and objectives. When it comes to stock investing, everyone has different goals and perspectives.

 

Some people hold stocks for an extended period of time, while others buy and sell quickly. This variation in stock investing is what distinguishes the various types of investors in the market. Day traders, swing traders, scalpers, and position traders are the four most common types of traders. In this article, we will talk about swing trade stocks and trading strategies for a successful trading journey.

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What is Swing Trading?

Swing trading is a trading strategy that requires the trader to hold a position for more than a day and can last up to weeks. The main goal of swing trading is to capitalise on the opportunity to profit when there is a price increase, no matter how small.

Traders will look for opportunities on other stocks after a swing ends, or they will wait for the same opportunities to reappear on the same stock.

In the chart, there are two types of swings: swing up for ascending price movement and swing down for descending price movement. It can be found in any timeframe, including the hourly and weekly charts.

However, because short selling is not permitted for traders or ordinary investors on the Bursa Malaysia, we are only able to profit during the swing up phase.

To be proficient in this technique, traders must be familiar with technical analysis in order to identify and forecast future stock price movements. Furthermore, technical analysis can assist traders in determining the target price and stop loss.

Traders can use indicators such as Japanese candlesticks, moving averages, and continuation and reversal chart patterns to forecast stock price movements. Traders can position themselves in the market faster and profit more by using a combination of indicators.

Stop loss management is important in this swing trading technique, as it is in other trading techniques. Stop losses are important for preventing large losses for traders or stock investors when faced with a false breakout or when decisions are made that are less accurate.

This method is ideal for traders who have a limited amount of time to monitor their portfolios. Traders who use this method do not need to spend a lot of time in front of a computer.

How Does Swing Trading Differ From Day Trading?

Swing Trading Day Trading
Average number of trades in a month 2 – 3 times a month 15 – 20 times a month
Rsk Moderate High
Frequency of chart viewing Several times a month All day
Analysis Technical & Fundamental Analysis Technical Analysis
Duration of each trade 1 – 6 month 1 day

How to Swing Trade Stocks

how to trade stocks for swing trading

1.  Open a Trading Account

Initially, traders can also open a demo account to practice swing trading strategies in a risk-free environment.

2.  Utilise on Technical Analysis

With technical analysis, traders can spot trend reversals and other price signals to help assist in their swing trading efforts.

3.  Choose an Asset

After conducting your research, choose which asset and time frame you want to swing trade. Also, based on your swing trading signal, determine your entry and exit strategy.

4.  Risk Management

To reduce risks, include a stop loss and take profit order. These risk management tools aid in the consistency and relevance of your trades to your trading strategy.

5.  Monitor Position

Also, it is important to monitor your trade while it's active, and keep an eye out for gapping and slippage, as well as changes in market sentiment.

6.  Exit Trade

Last but not least, remember to close the trade according to your swing trading strategy if it has not been exited by your stop loss.

Strategies for Swing Trading Stocks

stock swing trading

Swing stock trading, like other investments, is not without risk. Let's go back to the fundamental principle of investing: the higher the benefits you want to pursue, the higher the risk that must be faced.

That's why it's critical to practise the best risk management possible, so you can be ready when you get results that meet your expectations and those that don't. There are several techniques you can use to manage risk when swing trading, such as the ones listed below:

Entry Strategy

Entry strategy is a stock investment strategy in which you enter the market and buy stocks that are trending upward. The direction of the trend of stock price movement over a specific time period is referred to as the trend. There are three types of trends: uptrends, downtrends, and sideways trends.

By reading trends as best you can, you can determine when the most appropriate entry, including exit or stop loss placement, can provide better risk/reward potential. Long-term trading success will be determined by measurable and efficient entry methods.

Creating an entry checklist is one way to improve your entry technique and make it more accurate. Criteria such as important support or resistance levels, trading signals with a high probability, estimated entry levels, risk/reward ratio, and others. A checklist is required to make identifying the movement characteristics of the stock you are trading easier.

Exit Strategy

Exit technique refers to a strategy for exiting the market at the appropriate time. This exit strategy is critical for reaping the benefits of stocks in the best position. This exit technique is used when you have reached the desired price or when the stock price has reached the lowest limit value that you have set.

The exit technique prevents traders from falling asleep during a rise in stock prices, but it is extremely risky, and it also does not require traders to bear excessive losses during a significant decline in stock prices.

As a result, swing traders must understand how to determine the exit point. Don't forget to use the Trailing Stop feature to maximise profits.

How to Find the Right Stocks to Swing Trade

swing trading stocks

Swing trading stocks requires careful asset selection, as poor market selection can be a major weakness in your trading strategy. Use these suggestions to improve your market selection efforts.

1.  Utilise Chart Patterns

Maintain a close eye on stock charts and patterns. The better you understand the movement and pattern of a stock chart, the better you can predict price movement.

2.  Monitor Economic Situation

Keep an eye on the economic situation, which can help you determine a country's economic health as well as potential trading opportunities or risks in the future.

3.  Keep an Eye on Payday

Make a note of when the next payday is. Earnings calendars will assist you in incorporating unexpected price movements into your swing trading strategies.

4.  Be Cautious with Penny Stocks

Penny stocks are highly speculative investments, so trade with caution. Although the volatility of the penny stock markets provides high-growth trading opportunities, it also brings with it greater risks.

Best Stocks for Swing Trading

As swing trading usually involve holding the position for more than a day and that can last up to weeks, it is best for swing traders to choose a rather low volatility stocks to begin with. Below is the list of some of the stocks that can be best for swing trading.

  • Facebook, otherwise recently known as Meta

There are billions of Facebook users worldwide, making the stock of this corporation rather safe to trade with.

  • Apple Inc

Apple products are not entirely foreign, and they have a large following worldwide, particularly in Malaysia. It is worth noting that Apple releases a new product on a yearly basis, making the stock's movement somewhat predictable for those who wish to begin trading with them.

  • Microsoft

As of April 2020, it is estimated that approximately 24 million shares are bought and sold daily for Microsoft. As one of the most widely used products in the world, it is safe to say that Microsoft is one of the best stocks for stock traders to start their training journey with.

Best Brokers for Swing Trade Stocks

In finding the best brokers for swing trading, one must consider a few important features such as real-time quotes, charting tools, stock screening tools, the brokerage fees, as well as connectivity and speed of the trading platform. Below is the list of trading platforms, or brokerages that you can consider working with.

  1. Thinkorswim
  2. Ally Invest
  3. Interactive Broker Platforms

Pros and Cons of Swing Trading

Pros

  • Larger target. Swing traders are not looking for small profits because they want to make one good trade and avoid the risk of overtrading.
  • More time is required. Many swing traders typically work for one to two hours per day or week.
  • There is no need to check the market frequently. Swing traders only check the market a few times per day, if at all.
  • Reduce your risk. When you open fewer positions, you expose yourself to less risk.

Cons

  • More time is wasted waiting for a profit. It may take days, weeks, or even months to reach the target and close position.
  • The risk of remaining. Cost, leave your position open overnight. Also, if you keep positions open overnight, your broker may charge you a fee.
  • Risks posed by current events. Natural disasters, economic and political events can all wipe out a large portion of your profits.

Start Swing Trading Stocks and Start Making Millions!

make money via swing trading stocks

It is hoped that you will learn a little about swing trading, the pros and cons, effective swing trading strategies, and why you should try to trade using this technique from this article. Remember that in trading, there will always be times when you make a profit and times when you lose. So, trade wisely  to ensure a profitable trading journey.

FAQs

The best candidates have sufficient liquidity and steady price action. Meta (formerly Facebook), Apple, and Microsoft are suitable stocks for swing trading in certain market conditions.

Swing traders aim to make a lot of small wins that add up to significant returns. For example, other traders may wait five months to earn a 25% profit, while swing traders may earn 5% gains weekly and exceed the other trader’s gains in the long run.

It depends. Experienced traders may however, earn up to $80,000 a month.

  1. Utilis chart patterns
  2. Monitor economic situation
  3. Keep an eye during payday

Since there are no such blanket restrictions on day-trading for swing traders , you can buy and sell any stock on an intra-day basis.

Yes, professional traders swing trade.

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