The Top 5 Swing Trading Strategies That Work

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A simple swing trading strategy can make a huge impact on your total net worth. In fact, some investors rely exclusively on swing trading when deciding what stocks to buy now.

Why is this such a fantastic way to make money in the stock market? Because it requires lots of technical analysis, very little fundamental analysis, and the ability to capitalize on small gains.

You know that I often send out profit alerts that result in huge gains — often in the double and triple digits. However, you can’t always find opportunities like that.

If I have to choose between making a little money and making no money, I’ll always go with the former. Plus, as you might already know, even very small gains add up over time and contribute to your overall net worth.

If you’re looking for a simple swing trading strategy, I have a few options for you to consider. First, I’ll define swing trading and explain why it’s useful to investors.

What Is Swing Trading?

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Swing trading simple means executing short-term trades. It’s different from day trading in that the investments sometimes take several days to yield the best profits. However, you’ll enter and exit most positions in five to 10 days.

Investors are often looking for a simple swing trading strategy because they don’t know all the patterns to look for. When you’re first starting out in the stock market, you have a lot of research and studying to do, but you want to start to trade.

That’s where swing trading comes in handy.

It’s called swing trading because you’re looking for a pattern that indicates an upcoming upswing or downswing based on previous activity. For instance, if you’re bullish on a stock, you might watch for a tight pattern of consolidation, with the stock reliably swinging upward over and over again.

You could then buy shares in the stock, buy a call option, or enter into a futures contract for the stock based on your forecast for its movement. In some cases, the stock will breakout, which results in huge profits, but you can also benefit from gentle swings in the stock movement.

How Can a Simple Swing Trading Strategy Help Grow Your Wealth?

Many investors discover that they need a more diverse portfolio to really make money in the stock market. That’s how a simple swing trading strategy can help. In between those huge gains I tell you about through my various publications, you can profit from swing trading and bring in tidy sums of cash.

When people ask me about stocks to buy now, they’re often looking for the next big thing. I understand, and so am I. However, I often recommend smaller opportunities based on specific stock chart patterns. These swing trading opportunities fill in the gaps and provide you with consistent trading income.

But what simple swing trading strategy will work for you? Let’s take a look at some of the best options.

1. Watch for Bullish Patterns Poised to Break Resistance

Many stocks that become prime swing trading opportunities start with tight consolidation between resistance and support. They swing up and down, usually trending up farther with each rebound, and some will break resistance.

A good simple swing trading strategy to look for is a bearish pattern that might break support. After you enter the trade, pay careful attention to the sideways action. Do the upswings get higher every time? If so, you can capitalize on a bigger upswing should it occur.

However, if the upswings start to trend down, exit the position. You don’t want to risk the stock price falling below your entry point because you’ll lose on the trade.

Additionally, make sure there’s sufficient volume to warrant a trade. If few investors are buying and selling this stock, steer clear. Without significant volume, you can’t be assured that you can exit the trade when you want.

2. Look for Bearish Patterns That Might Crack Support

The opposite pattern can also become profitable and makes a good, simple swing trading strategy. Bearish patterns that continue trending downward over time might eventually crack support. When that happens, buy for big gains.

In other words, instead of “going long” on the trade as you did in the previous swing trading strategy, you’ll go short and trade on margin. You borrow shares from your broker and sell them at a high point, then buy them back when they sink lower. You return the shares to your broker and profit the cash.

You can always profit from the small downtrends. If the price action starts to move up, exit the trade.

3. Pay Attention to Flag Patterns to Capitalize on the Swing

Bull flags and bear flags are awesome chart patterns to look for. The more they repeat themselves, the stronger they become.

A bear flag is a pattern that resembles a flag held with the pole down. You see a tight consolidation of sideways price action, then a huge pole (upswing) that breaks support. It often happens several times, but you want to enter the trade right before that upswing.

The same goes for shorting a bearish flag. It looks like an upside-down flag pole.

4. Try Trading the Fade

Another simple swing trading strategy is to trade the fade. It’s also called fading and contrarian trading. Instead of following the trend and going long or short based on it, you take the opposite approach. You go long on a downtrending stock or short on one that’s trending up.

Why would you do such a thing? Because swing trading inherently involves price movement in both directions.

You’ll have more opportunities to take a long position because most other investors will enter into opposing positions. In other words, you’ll have plenty of shares to buy or short, depending on the unpopular position.

When trading the fade, you’re capitalizing on the opposing price movements, no matter how tiny. The goal is to exit your position at the farthest point from which you entered it for maximum gains.

5. Look for Consistent Sideways Action

When a stock remains tight within support and resistance, refusing to give up too much ground, it’s a prime contender for swing trading. It represents a consistent upward or downward swing, which lowers your chances of loss.

You’re looking for high-volume stocks with relatively low volatility here, which is the opposite of what you’d look for in a position you’d hold for several weeks. Since you’re condensing the time frame of the trade through swing trading, you want to find stocks that move consistently in one direction or the other.

Since you’re only looking for small gains, you can exit your position quickly and take your profits. For instance, a longer-term investor might want to make 25 or 30 percent on a trade. Swing traders, by contrast, are looking for between 5 and 10 percent gains. That’s a completely different game.

A simple swing trading strategy allows you to trade multiple stocks at once without putting much of your trading account in jeopardy. Plus, you get the advantage of quick income.

Accept Small Gains and Cut Small Losses

I’ve described several simple swing trading strategies that you can use, but remember that any trade can result in losses. Your job is to cut those losses as quickly as possible.

Let’s say the price action moves against your position. You can hustle to buy to cover on a short position, for instance, but that still leaves you in a vulnerable position. The better option is to exit the position immediately to stop the hemorrhaging.

The same thing goes for small gains, though. You don’t want to ride the full swing. In other words, if you expect a swing on a long position to top out at $12 per share, you don’t want to wait for it to hit $12. Sell at $10 or $11 instead. Accept your small gains to prevent big losses. Otherwise, you’re increasing your risk by a significant margin, which could become a dangerous habit.

Conclusion

The best thing you can do for your investment portfolio is to try new things. Diversifying your investments into different strategies and categories can make you a stronger investor and increase your net worth.

Finding just one simple swing trading strategy is good enough. You might try others, but most investors discover their comfort zones and stick with them. That’s fine.

At the same time, you want to look for those opportunities for huge profits. Fast Fortune Club offers several publications to help you learn how to invest in the stock market and what stocks to buy now. Join Money Calendar Alert to benefit from the huge double- and triple-digit gains I help my readers achieve every day.

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