Last Updated on 18 October, 2020 by Samuelsson

Every day, we hear a thing or two about people who swing-trade for a living. Some even quit their jobs to take up swing trading as a career. But strictly speaking, is swing trading really good? Is it a great way to trade stock?

Yes, swing trading can be a good approach to trading the stock market if you know how it works and uses the right strategies. So, the key thing is learning to swing-trade the right way so that you benefit from the uniqueness of this style of trading.

In this post, we will discuss how swing trading works, what it can offer you, how to benefit from it, and some good swing trading strategies.

How swing trading works

Swing trading is a style of trading that sets out to profit from the medium-term price moves. As you know, the price moves in waves, with up and down swings, whether the trend is upwards, downwards, or sideways. The swing trading style aims to capture the individual up and down price swings on the daily timeframe, and those swings normally tend to last from a few days to a few weeks, and quite rarely, up to several weeks.

Identifying a swing trading opportunity is mostly based on technical analysis, with little or no input from fundamental analysis. Most swing traders try to use chart analysis to predict where one swing ends and a new one begins so as to enter at the beginning of a new swing and get out before the opposite swing begins.

What swing trading can offer you

Swing trading offers a lot of benefits if you know how to read the market swings and take advantage of those medium-term moves. Here, we will be discussing a few of them.

Good returns

If you have a good swing trading strategy and have the skills to execute it properly, you can consistently make good returns from swing trading over the long term. Of course, not all trades will be winners, but with a good trading strategy, you will either win more trades or make more money from your winners than you lose from the losers over a series of trades. So over a long time, you will have more profits than losses. On average, swing trading can offer anything between 10% and 50% per annum.

Free time to pursue another source of income

One of the main benefits of swing trading is that you don’t get to monitor your trading chart all day long like day traders do, because the price data is printed only at the end of the trading day. Hence, you can actually trade part time, while you pursue another source of income, which could be a 9-5 job or a freelancing gig. Whichever way, you are making extra income.

Less likely to suffer need to make money syndrome

Since swing trading affords you the opportunity to take a job or pursue another business that brings in money, you are less likely to be depending on your trading profits to settle your bills and take care of your basic needs. Hence, you won’t have that urge to force big profits in every trade you take, which can lead to making dangerous mistakes like using too much leverage or not taking a loss when it’s right to do so.

Flexible capital management

With swing trading, you don’t get to tie your trading capital down in one losing stock for many months or years. You cut your loss early enough and free your capital to make the next trade. This way, your money is more likely to be more useful in the market than lying dormant in a non-performing stock.

How to benefit from swing trading

To be able to enjoy the benefits that come from swing trading, you need to learn how to analyze the market to identify swing trading opportunities. Alternatively, you can make do with swing trading signals from a reliable source.

Learn to swing-trade

You can do this on your own. Read a few stock trading books to understand how the market works. Then, do your research and develop your trading strategies. Back-test them and also practice paper trading with them to see how well they work. However, this is time consuming, and you may still not learn useful swing trading skills.

An easier way to learn swing trading is to enroll in a swing trading course like the one organized by the Robust Trader, which will teach you proven strategies with back-tested results.

Subscribe to swing trading signals

If you want it the easiest way, without bothering to learn how to analyze the market yourself, you can subscribe to their swing trading signals from the Robust Trader.

Some good swing trading strategies

Here is a summary of the common swing trading strategies that work:

Mean reversion

This strategy is based on the concept that stock prices tend to return to the mean after making significant moves above or below the mean value. The idea is to place a buy order when the price is in extreme oversold levels. Some of the indicators you can use include RSI, moving average, and Bollinger bands.

Trend-following

With this method, you aim to enter a trade in the direction of the trend when the price is showing a lot of momentum. The ideal thing is to enter after a temporary pullback so that you can ride the next impulse wave in the direction of the trend. While you trade both an uptrend and a downtrend, if you are new to trading, it is better you trade only the uptrends since stock prices have unlimited upward potential and limited downward potential.

Breakout strategies

This strategy creates a buy signal when the price breaks above a certain resistance zone or out of a trading range or channel. The idea is to benefit from the momentum that follows such a breakout move. A common example of this method is a break above the 20-day high, which was used by the famous Turtle Traders.

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Swing Trading Course

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Final words

Swing trading is a good approach for trading the stock market if you know the right strategies to use. The main thing is to learn how to swing-trade the right way so that you benefit from the uniqueness of this style of trading.