Swing trading, with its consistent results, relies on numerous strategies. Whether you’re a new trader or just have shifted to this trading style but are uncertain about what strategies you should implement to seek consistent yet favourable outcomes, fret not.
Here’s a detailed blog post, shedding light on five top swing trading strategies that, if employed, will best work. Let’s check them out…
Momentum Trading Strategy
Using this strategy, swing traders – regardless of their level of expertise – can profit from stocks that exhibit strong price momentum.
- How to Use It – Take advantage of momentum indicators, such as MACD and Stochastic Oscillators. Such indicators can help you identify trends.
- Entry Point – In case the MACD crosses above the signal line or the Stochastic Oscillator lies in the overbought/oversold zone, enter without any delay.
- Exit Point – If you see the momentum indicators start showing divergence or the stock reaches a key support/resistance level, exit.
Breakout Strategy
This top-notch strategy allows you to trade stocks that break through key support or resistance levels.
- How to Use It – Determine primary price levels by utilising the horizontal trendlines.
- Entry Point – The moment when the price breaks above resistance with heightened volume, you are advised to buy.
- Exit Point – Depending on the height of the breakout range or the next resistance level, you should consider setting a target.
If you are a new trader, the wise approach is to learn about what is a margin account. Then, use this account to sell short or extend your buying power by borrowing money against the existing securities. This will skyrocket both the profit and loss relative to the account’s value.
Gap Trading Strategy
Overnight economic news and earnings reports or updates lead to stock price gaps, so focus on them to stay on track.
- How to Use It – Take sufficient time to figure out the types of gaps (such as breakaway, continuation, or exhaustion)
- Entry Point – If you choose a breakaway gap, it would be beneficial to enter in the direction of the gap with a robust volume.
- Exit Point – In case a gap is filled, or the price touches a support or resistance level, it’s the right time to exit.
Earnings-based Strategy
This swing trading approach is all about allowing individuals to trade around earnings announcements. So, they can capitalise on volatility.
- How to Use It – It’s advisable to look for stocks with upcoming earnings. Remember to track implied market volatility.
- Entry Point – A couple of days before the announcement, you should enter trades, but only if market sentiment is favourable.
- Exit Point – The best approach is to exit following the announcement or when the price reacts to the recent market news.
Volume and Price Action Strategy
This swing trading strategy involves combining volume analysis with price action to identify strong setups.
- How to Use It – Keep an eye on volume spikes alongside bullish or bearish candlestick patterns.
- Entry Point – Consider buying when a bullish candlestick pattern, accompanied by high volume, forms at a support level.
- Exit Point – Be aware of the exit point, which typically occurs at resistant levels or when the volume decreases.
In different market conditions, you (as a swing trader) can achieve consistent outcomes by implementing this strategy with discipline and confidence.
