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How to Swing Trade Stocks (Step-By-Step Tutorial)

RagingBullRagingBull ·

When you’re swing trading, it’s sometimes hard to figure out what to trade. Here’s our tutorial on what swing trading really is and how to swing trade stocks.

Swing trading is a difficult task, and oftentimes, you’re using various analysis tools to try to catch profit over multiple day holds. The benefit of buying and holding over multiple days is that you’re saving capital by “trading” less when compared to day trading.

Stock chart swing trade

However, there is some risk associated with holding stocks for multiple days, such as news events that may be released overnight. That being said, if you’re looking to swing trade and understand the risks, you need to know how to find stocks to swing trade.

Depending on your trading style, you might want to use a catalyst event, technical analysis or fundamental analysis when conducting due diligence. For the most part, combining technical analysis and catalyst events work well in the trading community. Let us first understand what swing trading really us before we proceed to learn how to find stocks to swing trade.

What really is Swing Trading?

Swing trading is basically aimed at making the most of short-term opportunities for profits in the market. Swing traders fit in between day traders and buy-and-hold investors.

The key difference is in the timing— the duration of time for which the swing trader holds position. The swing trader will at least hold overnight while the day trader has tighter limits and will close before the market closes.

The swing trader masters the art of holding onto a security for just long enough to capture price spikes and then quickly selling it off before the trend changes.

Remember, as a swing trader— technical analysis is your friend.  Swing traders will examine charts and formulate a unique strategy. There is no one size fits all, though— a strategy may or may not work.

Pros and Cons of Swing Trading

Swing trading presents unique opportunities but also presents its fair share of challenges. Let us examine some major advantages and disadvantages of swing trading.

Person trading stocks

Pros:

  • Maximize your short-term gains: Swing trading helps use short-term price movements to make maximal short-term profits. As the name suggests, the trader uses the market swings in his stride. The market is continuously changing and it is not always on the support and resistance zones. The swing trader will keep trading in and out and make profits all along the way.
  • It is easier: Swing trading is also relatively easy. There are a few things to keep in mind. The strategy mostly includes large-cap stocks which promise greater volume and volatility.
  • Versatility and flexibility: Swing traders can use a number of different investment vehicles to maximize their profits and put their strategies to test. It is possible to apply strategies to groups of stocks that are bundled in funds, cryptocurrencies such as Bitcoin, and single stocks, of course. This makes swing trading very versatile and promising.
  • Availability of tools: The swing trader relies on technical analysis and has a number of tools at his disposal. There are several swing trading platforms and resources such as video training, mobile apps, and online groups of swing traders which can dramatically raise the odds of making more profits.

Cons:

  • Needs time: Swing trading involves staying up-to-date on the market conditions by the hour. You will need to extract significant time from your daily life for market monitoring and analysis to make this activity profitable if you are really serious.
  • Involves risks: Swing trading can be a very risky endeavor indeed, especially for those who are not accustomed to the level of risk-taking and stresses it involves.
  • Missed long-term opportunities: Without a doubt, owing to the very nature of this activity, a swing trader will miss out on any long-term opportunities since he focuses only on the short-term.
  • Experience in technical analysis: The swing trader will need to really master the art of interpreting charts, graphs, and using technical analysis tools. They will need to be exceptionally good at it to be able to make the right decisions. If there is one individual who needs a thorough understanding of technical analysis more than any other trader, it has to be the swing trader.

I highly recommend checking out the Raging Bull web resource on technical analysis tools which is a great way to learn how to use these tools in creating a strategy that can promise higher rewards.

How to Find Stocks to Swing Trade

The first thing you want to do is see if there are any upcoming events, such as earnings. You can do this by going on the company website, or EarningsWhispers. Next, you want to see if there are any news events. Generally, stocks need a catalyst to move.

A few quick tips:

  1. You’ll want to start your trading day early and check on company news. Most trading platforms should have news built-in so make sure yours does as well before proceeding.
  2. On the other hand, if you don’t have access to this, then you can check CNBC, Bloomberg, and Finviz. Moreover, swing traders will also look at SEC filings too.
  3. Keep in mind, you need to be mindful of overall market news, such as political and economic events.
  4. For the most part, we use The Basics of Technical Analysis in Day Trading technical analysis to spot potential trades, and if there’s a positive catalyst to support a bullish pattern, it could increase the probability of the trade being successful.

Technical Analysis

If you don’t have access to a screener through your trading platform, you could use Finviz to do that. For example, let’s say you find buying stocks above the 200-day simple moving average and is trading in an up channel works well for swing trading. You could easily do that using Finviz’s free tool.

finviz screener

For the most part, we swing trade penny stocks, as well as low-dollar stocks. Now, keep in mind, not all penny stocks are bad. You should find the ones that trade on Nasdaq or NYSE. It’s not hard to learn how to trade penny stocks if you know what to look for.

Examples of Finding Stocks to Swing Trade

Now, I’ve found what works best for me and learned how to find stocks to swing trade over time. If you’re a technical trader, it helps to look at technical patterns every night and see which ones are poised to rebound or break out.

I like to look for stocks that have been up big, and pulled back, giving another potential entry. A lot of the times, I’ll screen for this on my trading platform, and look at the chart to see if it fits my setup. For example, here’s a look at some of my trading plans.

BLNK – I’ve been waiting for a pullback to swing this one. Using Wednesday’s low of $5.31 I’m watching for an entry and swing back to the middle $6’s or maybe $7 if it heats up.

BLNK stock chart

AETI – Picked this one up on Thursday and it ran about 30% for me, I took 2/3 off for about $3,000 and hold 1/3 in play above the MA(200). Will consider adding 10,000 shares above $1.33 for a move to $2ish.

Final Thoughts

Once you’ve filtered and found stocks to swing trade, you need to come up with a plan. That means having a specified entry price, stop-loss price, and target price. If you don’t have a plan, you’re setting yourself up for failure. Especially when you’re swing trading, you need to devise a plan and properly manage risks.

Thereafter, if you execute a trade on the stock, you need to stay up-to-date on any news and figure out if there are any upcoming events. Finally, once you’ve exited the trade, you should journal and write out whether the trade worked. If it didn’t, write out why you think it didn’t work and how you could trade it differently if you see the same pattern next time. You should also make a note for your winning trades too.

When you review your trading journal, you could see which swing trades worked best. Ultimately, you would learn how to find stocks to swing trade by doing this.

Remember, swing trading is not without risks but you can certainly be in a much better position to manage them if you know your way around technical analysis tools. You can have a look at the resources designed by our trading experts which is a great way to master the art and science of technical analysis. This way, you can be sure you have the right strategies in place and be ready to face the market and the opportunities that it brings, every single day.

 

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