If you hope to become a profitable swing trader, you need to begin by understanding the basics: and that’s what we’re going to provide in this beginners guide to swing trading strategies.
Sure – a tool like VectorVest can essentially pick winning trades for you and eliminate much of the work on your end. It provides you with a clear buy, sell, or hold recommendation for any given stock – but where do these recommendations come from? VectorVest uses mathematical models to follow trends & patterns and make accurate predictions – which is something you need to know how to do on your own, too.
Using technical analysis to make predictions and time the market effectively will make or break your success with swing trading. That’s why today, we’re going to cover swing trading for beginners. In this short guide, you’ll learn how to do swing trading. But first, we have to explain what swing trading is and the overall strategy behind this approach to investing.
What Exactly Is Swing Trading?
First and foremost, what is swing trading?
Swing trading is a stock market trading technique in which a trader seeks to take advantage of “swings” in a stock’s price. It falls between day trading and long-term investing. Swing traders typically execute their trades over the course of a few days – or at most, a few weeks.
While swing traders may earn smaller returns per trade than long-term investors, these quick wins stack up over time and can outweigh the returns long-term investors earn. You’re also able to get in and out of the market with proper timing to avoid big drops. And, because you only execute a few swing trades per week – you don’t get stuck in front of the screen as much as you do with day trading.
Swing trading is less time-consuming, less risky, and maximizes profit potential as compared to day trading or long-term investing. As such, it is one of the most common trading strategies in the investment world today. Let’s give you the basics behind any swing trading strategy.
The Basics Of Swing Trading Strategy
The strategy swing traders use varies greatly from long-term investors who look to attain large chunks of profit per trade. The strategy also differs from day traders who get in and out of their trades on the same day. Because a swing trade is executed over the course of a few days, you can take smaller profit margins – between 5-10%. You’ll execute more trades over the course of a year than a long-term investor, so these smaller wins add up in the big picture.
Because your profit margins are smaller, it’s important to minimize the losses. Too many losses will quickly whittle away your profit over the course of a month. The good news is that swing trading isn’t a risky approach to investing. If you follow our advice below, you’ll minimize losses and enjoy a lucrative career as a swing trader.
How To Do Swing Trading: Quick Guide
Now that you know the different swing trading strategies out there, it’s time to give this a shot. Let’s get into the fun part: how to do swing trading. This quick beginners guide will provide you with an introduction to getting started – but it is not a comprehensive swing traders guide. It is worth investing in a course or program if you want to understand the principles.
With that said, you can execute your first trade today – in complete confidence – with stock prediction software. This eliminates the need to really understand technical analysis – which we’ll talk about more in-depth later on. Let’s begin with a discussion on risk tolerance and goal setting.
Set Your Goals & Determine Your Risk Tolerance
Start by setting realistic goals and determine the risk you can handle. These goals and risk levels should be specific to you – don’t just take other people’s advice. Here are a few stances you can take:
- Conservative (low risk, moderate reward)
- Prudent (moderate risk, medium reward)
- Aggressive (high risk, high reward)
- Speculative (very high risk, very high reward)
Your risk tolerance may change over time – maybe you’re aggressive now but after a few heavy losses, you’ll find yourself investing more conservatively. Or, perhaps you’re very conservative now – but as you start to earn substantial, consistent profits through your trades, your confidence will rise. After these initial wins, you will realize you’re capable of being successful through swing trading. You’ll trust yourself and your investing strategy more, and thus, get more aggressive and take bigger swings.
Your risk tolerance will dictate the types of stocks you buy – and it also dictates the type of swing trading strategies you employ. If you’re a highly speculative trader, you may buy more volatile stocks that a conservative trader wouldn’t touch. Similarly, you wouldn’t waste your time or energy with conservative stocks that yield lower returns. And, a speculative trader will get into stocks earlier than a conservative trader – who may need to see more validation of price swing before they enter their position.
Once you’ve determined the approach you’re going to take to finding stocks and executing trades, it’s time to actually do it.
Set Yourself Up For Success With The Right Stock Prediction Software
Fortunately for you, investing is easier than it has ever been. Through mathematical models, you don’t even have to conduct technical analysis yourself anymore. Why not let a stock prediction software do all the heavy lifting so you can just pick your swing trading stocks, find your entrance and exit points, and cash out?
That’s exactly what VectorVest does. It’s a simple approach to investing. Unlike any other software out there to date, it can accurately time market upswings and downswings. We take all emotion out of investing and use mathematical models to deliver three metrics for you: Value, Safety, and Timing.
These three metrics consolidate all the stock indicators you’re familiar with. With just these three metrics, you can make wise investment decisions that pay off. We take things even a step further, though. Based on this VST rating, we can recommend that you either buy, sell, or hold your stock. It couldn’t be any easier.
But, if you want to employ a swing trading strategy where you do all the work, more power to you. You can read up on our guide of the best indicators for swing trading. These indicators will help you build searches and identify potential in specific stocks.
Find Your Stocks Through Technical Analysis (Or, Pick Our Top Stocks In VectorVest)
Once you have stock forecasting software, the rest is easy. You can begin finding potential stocks for trading. There are so many different ways you can go about this.
Maybe you have a few stocks in mind – you can conduct technical analysis to validate them and find your entry point. If the stock doesn’t have enough momentum behind its price swing and you don’t think the timing is right, set some alerts on it. When the price hits or drops to a certain point, you’ll be alerted and you can take another look.
You can also start to build scanners that will identify potential stocks that fit your criteria. These scanners will bring in stocks to you on a daily basis so you can conduct technical analysis to find opportunities.
But, if you took our advice and went with VectorVest, finding your stocks can be as simple as pulling up our prebuilt searches. We have a myriad of pre-existing searches that will uncover potential stocks for you to swing trade with just the click of a button. A good place to start is with our daily list of the Top VST Stocks. These are stocks that – according to our value, safety, and timing metrics – have the best potential on any given day.
You can also lookup individual stocks and assess their value, safety, and timing – among any specific stock indicators you’re interested in. For most investors, though, we recommend keeping things simple. If you trust the VectorVest recommendations, you’ll come out on top more often than not.
Do you have a stock in mind right now? If so, plug it into our free stock analysis tool. We’ll tell you what that stock is really worth, how safe it is, and whether you should buy, sell, or hold it. You’ll also gain detailed breakdowns of the stock – explaining how we arrived at our recommendation. Like we said – trading with VectorVest will transform the strategies you use.
Set Stop Losses & Take Profit Orders
You don’t have to sit in front of your screen throughout market hours waiting for the perfect time to get into a stock or sell a stock. The beauty of swing trading is the low time commitment required.
You can set your stop loss as soon as you get into a stock. This is to mitigate your risk to a certain point. When a stock drops below a determined price point, you will sell off all or some of your position. That way, you know exactly how much you could lose on a trade.
Similarly, you can set a take-profit order. When your stock’s price rises above a set threshold, you’ll sell all or some of your position to secure that profit. Keeping consistent stop loss/take profit orders will ensure a successful, well-managed trading strategy. If you want a more hands-on approach – and want to be the one to push the button and either sell off your position – you can set alerts for specific prices.
Monitor Your Position Over The Course Of A Few Days & Exit
If your stop-loss or take-profit orders don’t fire, you can manually close your position after a few days depending on your swing trading strategy. Sometimes the price will go stagnant – and because you’re not a long-term investor, you’ll want to get out and move those funds into the next opportunity.
Build Your Portfolio Slowly & Diversify
Once you have begun implementing these strategies to find stocks that fit your investing style, you can slowly add stocks to your portfolio. You’ll want to build your portfolio slowly over time.
You should also remember to diversify your portfolio. While your specific style and strategy may bring up many of the same industries/stock types, putting all your eggs in one basket is a surefire way to feel industry-specific downturns. Over time, you want to build up a diverse portfolio where no single stock takes up more than 10% of your capital.
Wrapping Up Our Guide To Swing Trading Strategies For Beginners
We’ve covered the basics around swing trading, and discussed swing trading strategy. We even walked you through how to do swing trading and execute your first trade. So, it’s time to wrap up our guide to swing trading for beginners.
Swing traders can make their job as simple or as difficult as they like. If you truly enjoy reading through the charts yourself and employing different swing trading strategies, more power to you.
But these days, it can be as easy as pulling up our top searches, vetting them yourself, and identifying your entrance and exit points. We’ll tell you what to buy, when to buy it, and when to sell it. It’s really that simple – all you have to do is trust our process and realize profits. Sounds good? Head over to our site to start your free trial.