Are you interested in trying your hand at swing trading but aren’t sure how to get started?
While you can make a lot of money as a swing trader, you can also lose a lot. Swing traders buy stocks for a few days, then sell the stocks a few days later when the price moves up. At least, that’s the goal. While swing trading sounds simple in theory, it’s a lot harder to pull off in practice.
Before you get started, you need to know the top pro tips for swing trading. Read on to find out.
1. Pick the Right Stocks
To succeed in swing trading, you need to choose stocks that are relatively calm and not excessively volatile. Don’t look for stocks that are all over the place. Instead, opt for the ones that are trending slightly up or down and that have steady price action but not too much drama.
Remember, with swing trading, it’s realistic to make a living, not a killing. Begin following these stocks and making paper trades. Then, move on to the stocks with real trades and real dollars.
Teach yourself to note the signs of when to buy and sell, but keep in mind that the market conditions tend to change. This means that an approach that worked before may not necessarily work in the future.
2. Breakdown vs. Breakout
Breakdown and breakout are two popular swing trading strategies. With a breakout strategy, a trader takes a position on the early side of an uptrend.
Then, they monitor the stock, and once the price gets into unchartered territory, they make a trade. A breakdown strategy is the opposite. With this strategy, you wait until the price drops below a defined support level. We recommend choosing one of these strategies to start with when doing swing trading.
You also need to make sure you can answer the question, “What is swing trading?” before you choose one of these trading strategies.
3. Look at the Big Picture
When swing trading, it can become all too easy to hyperfocus on the small movements of a single stock. But, you need to look at the big picture if you’re going to succeed.
We recommend looking at a two-year weekly chart when you analyze a stock. To determine overall trends, look at the shares in relation to their long-term moving average. Next, take a look at a 6-month daily chart. Here, you can pick up on finer details that you might miss with a two-year chart.
Finally, take a look at the hourly charts to unveil the prevailing trends over the last few weeks.
Swing Trading: Time to Get Started
Now that you know these swing trading pro tips, it’s time to get started. If you’re wondering what stocks to get started with, we recommend some beginner-friendly ones such as Microsoft, Facebook, or Apple. These stocks can help you learn the trading trendlines.
And, if you’re looking for more swing trading tips, you can check back in with our blog.
