Swing trading can be fun & interesting, provided you stick to your rules and be consistent in following them.
Swing trading is arguably the most attractive trading style among traders. From newbies to professionals and baby boomers to millennials to Gen-Z, all have done swing trading at some point in their lives. We often hear- ‘buy low, sell high’, ‘follow the trend’, etc but in reality, it is easier said than done. Moreover, 95 per cent of the traders lose money in their trading journey. Swing trading can be fun & interesting, provided you stick to your rules and be consistent in following them.
So, without wasting much time, let us know more about how to be good at Swing trading!
Allow us to introduce you to the basic rules of Swing trading:
*Always trade on breakouts: Breakouts are far more essential in a swing trading setup. It indicates buying interest in the stock and it’s more likely to test higher levels than an average low momentum stock.
*High volumes: High volumes are a must in swing trading as it demonstrates the participation level among the traders. More volume indicates strong interest among the traders in buying the stock. Institutional participation also adds a positive influence in selecting a trade that has high volumes.
*Understanding price patterns: Price patterns are considered by every professional swing trader. It gives you a confirming picture of the trend and the likelihood of the stock achieving its targets increases.
*Technical parameters: The key technical parameters like RSI, MACD, ADX, Fibonacci retracement, moving averages, etc. provide additional information about the stock that traders often fail to analyse.
*Always keep a stop-loss: This is something that most traders tend to ignore. Unwilling to book a loss, traders end up making more losses. Stop-loss in trading is a must, note that!
*Avoid illiquid stocks: Last but not the least, avoid illiquid stocks! You don’t want to get caught in a position that you couldn’t exit due to illiquidity in a stock.
Now, let’s head towards some of our own examples that we had recommended to our readers in our Weekly Flash News Investment newsletter:
The above graph is the daily chart of JAMNAAUTO, which we had recommended to our readers in our FNI vol. 38, issue no. 37. On June 30, we recommended the stock at Rs 122.10 level. It had formed a 23-week cup & handle pattern and was trading just at the pivot level. The RSI indicates bullish strength while ADX showed strong trend strength. The volumes were also above-average. As per our expectations, the stock traded higher and we asked our readers to book profit at Rs 135.50 levels thereby, booking a profit of a whopping 11 per cent in just two days!
The above is the daily chart of TVSMOTOR, which we had recommended to our readers in our FNI vol. 38, issue no. 36. On June 23, we recommended our readers to buy the stock at Rs 772 levels. It formed a 31-week cup pattern with 37 per cent depth. The RSI was in the bullish zone and so was ADX, pointing in the north direction. The stock traded above all the key moving averages, which is a positive indication. The volumes were huge and attracted buyers. In just three trading sessions, we achieved a profit of over 6 per cent!
Thus, traders, who had traded according to our strategy, would have made good profits! As we reiterate, swing trading is stress-free and profit making.