While there are numerous swing trading strategies out there, some tend to work better than others.
Developing a strategy for swing trading can take time. The best strategies always constitute trading rules such as the profit target, entry point, the set of parameters for the trade entry, money management, and rules regarding how to define the position size or place a stop. Below are some of the most clever swing trading strategies that investors often use to trade in the stock market.
The Gap and Go Strategy
This strategy is typically used in day trading, where investors trade stocks gapping down or up considerably on high relative volume. But this setup works in favor of swing trading too. Major positive news generally results in massive up gaps, and swing traders patiently wait until the up gaps are filled. This smart trading strategy works well because as the stock price keeps increasing, the swing traders are impacted by the fear of missing out. This is when they start purchasing stocks at higher prices.
The Fibonacci Retracement Strategy
This retracement pattern can help traders to identify resistance and support levels and further speculate on possible reversal levels of stock charts. Stocks often retrace within a trend, for a certain percentage before reversing again. If you plot horizontal lines on a stock chart, at the Fibonacci ratios of 23.6%, 38.2%, and 61.8%, it can disclose the potential reversal levels.
Monitor and evaluate your position
Keep monitoring your trade performance for as long as it is open. Make sure you are aware of slippage and gapping, and look out for changing sentiments within the market. Try to learn more about gap trading if you are a novice trader.
The Channel Trading Strategy
This strategy for swing trading requires you to identify a stock that is trading within a channel while depicting a strong trend. If you have already plotted a channel on a stock chart that is revolving around a bearish trend, then you may consider opening a sell position immediately after the price falls off the channel’s top line. When employing channels for swing trading, it is crucial to trade by following the trend.
Research potential stock markets by conducting technical analysis.
There are many helpful tools out there, like the pattern recognition scanner can help you identify price signals and trend reversals to help you succeed in your swing trading efforts.
Bottom Line: Swing trading aims to identify a sweeping trend and seize enormous gains within it.
