There is a wide variety of strategies you can use to swing trade. But then, not all of these strategies will work for everyone in the long haul. The money management scheme you use alongside a strategy comes into play when swing trading, thus the difference.
In this article, we have listed and described the top five swing trading strategies you can use. They are all effective in the identification of trading opportunities and management of trades.
The Fibonacci retracement strategy works perfectly for traders taking low risks. You can use it to identify the best level to get involved in the market. The most common levels under this strategy are 61.8%, 38.2%, and 23.6%. Traders believe that there will be possible reversal levels.
Traders use their favorite candlestick pattern to play at these levels. In general, you will be looking for an exciting place to play a reversal candle. That means you can enter the market when the price is on a downward trend with the hope of catching the resumption of the initial movement.
Many traders overlook this strategy, but it is one of the most effective. You need to identify the best time to trade and make a profit. Finding a stock that is displaying a strong trend within a channel will help you determine this point.
A channel occurs when an asset’s price keeps moving between two parallel trendlines. Here, you’ll be taking advantage of upward and downward trends. A downward trend means that the cost of an asset is going low. As a trader, this is the perfect time to look for selling positions.
An upward trend, on the other hand, means the opposite. You should also note how long a channel has existed, as that helps you determine its strength.
Stuck in a Box
This strategy is one of the simplest to understand and implement. As the name suggests, the price here gets stuck in a specific range, somewhat like a box. The core idea here is that you will be buying low and selling high according to the price changes within that range.
It would be best to wait for the price to come to an area of value, best for trading. But then, your first step should be identifying your market range—exit before selling pressure steps in as you will have a higher probability of making profits. The pressure piles up at the resistance point.
Identifying continuation gaps can be one of the best techniques to use when trading. You will be looking out for trends in price broken by a consolidation period before that trend continues. It is best to focus on long-term trends when using this strategy.
However, it is essential to wait for the breakout before deciding to trade. That helps you differentiate continuation patterns that will result in a continued trend and those that won’t. You will quickly identify the best time to buy or sell if you stick to these directions.
The best way to swing trade is by trying all these strategies. Experimenting helps you identify what system works for you and which one doesn’t. Besides, you can learn about different variations within these systems. The Fibonacci retracement strategy, for instance, has lots of trading possibilities to explore.
Regardless of what you do, take swing trading as an investment. Ensure you trade within your limits, especially when starting. In swing trading, it is your money and the market working for you.
Focus on finding a strategy that will work best for you in the long-term. That’s the best way to build your trading portfolio and make more money.