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Swing traders love market volatility. They deploy several profitable swing trading strategies that help them take advantage of short-term trends to make regular smaller gains while eliminating losses at the same time. These small gains, over time, add up to a lot of profit due to compounding. These periods typically last longer than a day but shorter than a month.
Swing trading is one of the most popular trading methods during volatile markets. Markets are rising and falling at the drop of a hat. Any news in the market causes it to move either way. Because of the ongoing economic situation, the balance between the bear and bull markets is continuously shifting. These movements provide massive opportunities, and swing traders take advantage of them. As a result, many investors want to adopt this trading plan or subscribe to swing trade alert services.
However, it takes work to become a swing trader. You have to perform market and sector sentiment analysis accurately to understand the overall attitude of the market toward a specific asset or the financial market as a whole. Therefore, to ace this trading style, you must develop correct swing trading strategies right from the beginning of your trading journey.
It is one’s strategies that can make all the difference, so making appropriate decisions is a must. Determining correct swing trading strategies could be challenging, especially if you have just started exploring swing trading mechanisms or are about to begin.
Best Swing Trading Strategies
5 Best Swing Trading Strategies Every Swing Trader Should Use in 2023
Here are a few swing trading strategies to help you understand how to swing trade and be successful at it. These strategies are widely used and have been tried and tested by multiple swing traders over the years.
1. Trend-catching Strategy
The trend-catching strategy involves holding onto the ongoing trend until it changes, i.e., exiting the position with the changing trend lines and booking profits. It consists of correctly identifying a trend’s direction and entering a suitable market. Many swing traders who look for potential gains in short-term trades adopt such a trading strategy.
Swing traders starting may rely on price momentum changes and profit via trends. This means the traders can enter the market when a trend continues after a deep pullback. For instance, say the price of a stock is rallying, and that uptrend is signaling a shortcoming, then a trader may use that as an opportunity to go for a short position when the price is below the support level. Nevertheless, it is essential to use a few technical indicators like RSI and MA while making decisions.
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2. Fibonacci Retracement
The Fibonacci Retracement strategy helps establish optimal entry points during a swing trade. It gives definitive price levels for swing traders to achieve their risk and reward propositions. In swing trading, traders are usually aware that many stocks tend to retrace themselves at different levels before reversing to the initial trend. So, with this strategy described above, the traders can identify the support and resistance levels of the stocks they intend to deal with.
Fibonacci retracement tools available in the market can plot horizontal support and resistance points at different levels. Therefore, those who intend to use this strategy can use such tools to draw horizontal lines at various percentage levels, say 23.6%, 38.2%, and 61.8%, to identify the potential reversal levels. For example, if a trend is downward, a trader can go for a short trade at the 61.8% Fibonacci line and exit when the price touches the 23.6% level.
3. Breakout Swing Strategy
A breakout is said to take place when the price of a stock moves away beyond the defined price range, i.e., goes above the resistance levels. Swing traders who intend to use this strategy search for price breakouts and mostly open positions at the beginning of an uptrend situation. To ace this strategy, a trader has to enter a trade as soon as they spot the desired level of volatility. They should take a position early in a potential uptrend to derive expected profits.
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As per this strategy, profits can be substantial if the momentum takes off. However, as in this strategy, a significant reliance is placed on support and resistance levels. It is a bit complicated and is suitable only for those who are well-versed with the industry trends and have significant experience trading in volatile markets.
4. Trading Off Support Or Resistance
Support and resistance trades are a kind of trend continuation trades. In this case, the trader detects a clear entry point to enter the trend’s direction. Anyone interested in trading this way should know two prerequisites: the stock must be trending and have well-defined support and resistance levels. To ensure these, a trader may focus on the leading sectors and then look for a store that has a consistent upward trend with an entire range of higher highs and higher lows.
Moreover, if a stock is approaching its support level and that level is expected to be broken, he should avoid buying that stock. Further, paying attention to momentum levels is critical because buying stocks that make a new momentum low while they pull back would be disastrous.
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5. Fading Trading Strategy
It is the strategy of trading against the momentum. This means the trader will buy while the market sells and vice versa. By this, the trader will be betting on reversals to profit from the potential corrections. Considering the volatile nature of the market, traders who follow this approach try to capitalize on the majority of the initial turn-in market. They generally study vital statistics, public interest rates, trade disputes, and human psychology while planning their actions. Due to its high complexity and higher trading risk levels, the Fading Trading Strategy is only suitable for advanced traders with a trained eye.
There are numerous swing trading strategies, and they have been successful and unsuccessful on different occasions. Only so many swing trading strategies can fit all market environments. So, to begin with swing trading, one can go with strategies that don’t require too much technical analysis. Beginners can try the trend trading approach and learn the different swing trading indicators involved in the process. Moreover, you can also test a chosen strategy in various ways to derive better learnings.
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