Swing trading is a very old trading technique. It has been around for 100 year or more. Most active traders trade some variation of a swing trading technique. The basic strategy in swing trading is to find a stock or instrument like ETF or Index or future which is having a strong trend and then enter in the direction of the trend on pullback or retracement.
This is a workhorse method and once you perfect it, it gives you steady stream of trades. The trick in swing trading is good risk management.
The basic principle of swing trading
- Find a stock in a up trend
- Find a area of consolidation or pullback
- Enter when the stock starts breaking out of such consolidation
- Use tight stops
- Exit near swing high or when stock stops making new high
- Do this over and over and over and your money compounds fast
This is the bread and butter strategy for those who want to make living trading.
Variety of ways to swing trade
If you look around people use different techniques to swing trade. Some use simple techniques some use very complex technique. But the basic principle is same to capture part of a move in a uptrending or down trending stock.
- Some use technical analysis
- Some use charts
- Some use indicators
- some use support and resistance
- some use chart patterns
- some use MA, SMA, EMA, MMA, KAMA, GMMA, WMA
- some use candlesticks
- some use three line break charts
- some use Renko charts
- some use Kagi charts
- some use Ichimoku charts
- some use point and figure charts
- some use Fibonacci
- some use Bollinger bands
- some use Standard deviation
- some use Keltner channel
- some use oscillator
- some use pivot points
- some use mean reversion