Dear Happy Investor, let’s talk about swing trading for beginners. In this article we will explain how to begin with swing trading. We will provide tips for swing trading in stocks and crypto as well. This might be interesting. Swing traders often achieve high market returns. Not necessarily on daily basis, but definitely on monthly or even yearly basis. In fact, many fund managers are actually swing traders that buy value stocks low and sell them high.
On to financial freedom!
What is Swing Trading?
Swing trading is a trading strategy in which investors acquire stock or other assets like crypto and hold it for a short period of time (typically a few days to several weeks) with the aim of gaining profits. It is a popular strategy among day trading and short-term trading.
The swing trader aims to grab a portion of any potential price movement or "swing" in the market. Gains may be smaller since the trader focuses on short-term trends and seeks to eliminate losses as rapidly as possible. Small gains made consistently over time, on the other hand, may add up to an attractive annual return.
You can begin with swing trading in several ways. We prefer the long-term swing trading tactics. In this, you can buy stocks based on their valuation. Hold for several months. It may increase to 30% to even 100%. Swing trading in Value stocks can be very powerful.
Another way to profit from price volatility, is by swing trading crypto. Small crypto are very volatile. However, also bigger crypto coins can swing upto 50 – 100% in several months. The only problem with crypto is that you must swing trade based on technical analysis. While stocks can be swing traded based on valuation and intrinsic value. That is definitely more fact-based and thus less risky.
How Swing Trading Works
The swing trader analyses patterns in trading activity to buy or sell a stock to capitalise on price movements, mostly in the direction of a trendy stock. In simple words, buying on lows and selling on highs may also be referred to as swing trading. While trading stocks, swing trading strategies come in handy on large-cap stocks. Because these stocks have substantial trading volumes, they provide investors with insight into how the market perceives the company and the price movements of its asset.
Like every other type of trading strategy, Swing trading is fraught with risks. Swing traders face a variety of risks, the most common of which is gap risk. The price of a stock or crypto moves up and down significantly as a result of news or data release (for example, earnings in the case of stocks) that occur while the market is closed, whether overnight or over the weekend.
The shock of any unexpected news will be reflected in the opening price. The longer the market is closed, the higher the risk will be. Abrupt changes in market direction also pose a risk, and swing traders may lose out on long-term trends by focusing on shorter position holding times.
How to begin with Swing Trading in Stocks?
Below we will give some tips to begin with swing trading in stocks. To start you will need an investment account. Because swing trading implies frequent trading, it is important to choose a broker with low commission/transaction fee’s. This will save you money.
Another tip is to invest in your skills and education. For example, stock prices will be affected by many factors. It can be macro-economic changes, such as interest and inflation. It could also be specific to the industry, like disruptive innovation or increased competition. Thus swing trading in stocks is not entirely based on the stock. Know this, and you will increase your chances of success.
Tips to Swing Trading with Stocks
Below are other tips to begin swing trading in stocks.
Make use of chart patterns: Use a pattern recognition scanner to identify reversal patterns such as a double top or triple top chart pattern. Find out the most important chart patterns and their meanings by reading about stock chart patterns.
Follow the economic calendar: Keep an eye on the economic calendar, which may help you determine the strength of a country's economy as well as potential trading opportunities or risks in the future.
Factor in earning calendars: Earnings calendars can assist you in earning sudden price movements into your swing trading strategies.
Give extra attention when trading penny stocks: Penny stocks are very speculative investments, so use caution while trading them. Although the instability of the penny stock markets offers high-growth trading opportunities, it also presents larger risks.
Use Earning Revisions: at Happy Investors we select our best stocks both at growth and value. To determine the best value stocks, we use paid databases. These databases are analyzing several factors, so they can determine the relative value of a stock in relation to its competitors. For swing trading in stocks, it is important to know the relative value. If relatively undervalued, it may bounce. A swing trade can be executed to buy low and sell high, based on relative valuation. Or, alternatively, you can swing trade stocks based on earning revisions. If stocks are predicted to have up-revisions in earning, they will most likely rise in the short term.
How to begin with Swing Trading in Crypto?
To begin with swing trading in crypto is even riskier than in stocks. The high volatility may lead to significant price drops. The issue with crypto trading is that there is less fundamental basics. Crypto can’t be valued like stocks. There is no profit (or loss). Thus, crypto swing trading should be done with technical analysis and other day trading strategies like news-trading.
Tips to Swing Trading with Cryptos
Here are some tips to begin with swing trading in crypto.
Demo Account: If you're undecided if swing trading crypto is suited for you, a demo account will let you access the markets in real-time and practise firsthand. Most brokers provide a free demo account with virtual funds, so you will never risk your personal capital while testing your swing trading strategy.
Pay Attention To Bitcoin: Because most altcoins are inextricably tied to the movement of Bitcoin, when the price of BTC goes up, the price of cryptocurrencies tends to fluctuate. This is because people are exiting the altcoin market to ride the Bitcoin wave. In contrast, if the price of BTC falls suddenly, the price of cryptocurrencies generally falls as well. Consequently, the best time to trade altcoins is frequently when Bitcoin is steadily increasing over time.
Fees & Costs: Because swing trading cryptos involves placing fewer trades over longer periods of time, the spread is charged less frequently and is generally smaller. On the other hand, Swing traders will incorporate swap fees, which are daily interest rate fees applied on overnight positions. A few brokers may also charge high commissions or other account-related fees, so double-check before signing up. There is a fair chance of you being a citizen of a country where taxes are imposed on crypto.
Education: Swing trading crypto may frequently entice novices wanting to start with medium to long-term trading. Having said that, you will still need access to solid educational resources as well as additional tools to assist you in developing your knowledge. This might be anything from a crypto training course to a community forum to an online swing trading book. Keep this in mind while choosing a crypto broker.
It is very important to learn as much as you can about investing in crypto.
Analysis: Technical tools and fundamental analysis are used to build effective swing trading crypto strategies. A solid grasp of daily candlestick charts and basic indicators can get you started, but it is critical to stay on top of fundamental events and financial reports that may drive market swings. When it comes to cryptocurrencies, it's recommended to pay attention to credible sites like Binance, Coin Metrics, CoinDesk, and Coin Telegraph.
Steps to Begin with Swing Trading in Stocks and Cryptos
To complete this article, we will mention the basic steps to begin with swing trading in either stocks or crypto:
- Opening a live trading account: To start swing trading stocks, open a live trading account. It's possible to open a demo account to practise the mentioned swing trading strategies in a risk-free environment.
- Research markets using technical analysis: You can spot trend reversals and other price signals using tools like our pattern recognition scanner to assist in influencing your swing trading efforts.
- Choose an asset to swing trade: After doing your research, choose the asset and time frame you want to swing trade. Also, based on your swing trading signal, determine your entry and exit strategy. To purchase AAPL or BTC, for example, when the price reaches the support level.
- Use risk management conditions: To mitigate risks, include a stop loss and take a profit order. These risk management tools help you in keeping your trades consistent with your trading plan.
- Monitor your position: Strictly follow your trade while it's active. Keenly notice gapping and slippage, as well as changes in market sentiment.
- Exit trade: Close the trade according to your swing trading strategy if the trade has not been closed by your stop loss. A trailing stop or a defined exit signal may come in handy in this regard.
What do you think about beginning with swing trading? Do you prefer stocks or crypto, and why? Leave your comments below.