Stratégies de Swing Trading : Débloquer les opportunités de marché à court et moyen terme

The trading world is very dynamic. Each asset class has its volatility, and each trader has a trading style and strategy. No single glove fits all, and this is one of the reasons why trading and investing are so attractive and interesting. Surely, many principles and concepts must be understood before buying and selling stocks or finalising future contracts. Even then, the trading world is evergreen and can teach you something new daily. Generally speaking, each trader can be divided into day and long-term traders. 

Day traders hold any position for a very short period of time. Their profits are generally low and mainly depend on the trader’s ability to see and seize opportunities based on the volatility in the market. This strategy is great for traders who want a quick turnover and do not primarily associate themselves with a single asset or asset class. On the other hand, long-term traders are the traders who hold positions for a long time. They generally have the highest profit margins and often follow a strategy and world news to buy or sell the stocks. In between these two types of traders, a third trader holds the stock for a medium amount of time and is called a swing trader. 

These traders hold the stocks for a few days at maximum and wait for the stock to have enough price movements to make reasonable profits. This type of trading is also known as short to medium-term trading. Short-to-medium-term trading can be beneficial for a couple of reasons, but only for those who deeply understand the concept and have prior expertise in the area. Another important thing to note here is that world economic and geopolitical news may considerably affect the price of your stock, even if you are a day trader, long-term trader, or swing trader. 

Understanding these concepts is essential if you are a beginner looking to start trading. We also recommend practising on a demo account before trading in the real world. A demo account is an account that is offered on many different trading platforms. This type of account mimics real-world conditions so traders can place orders and experience real-world conditions without real capital. In this article, we will take you through everything you need to know about swing trading, its key components and much more. 

What Is Swing Trading?

Swing trading is a type of trading where the trader holds a position for a short-to-medium term. This term can be anywhere from a few days to a few weeks. Swing traders utilise technical and fundamental analysis tools to look for entering and exiting points in the market. The main goal of swing trading is to profit based on a chunk of potential price movements in a volatile market. The reasons behind the volatility may be geopolitical news, policy changes, company administration changes, world economic news, etc. If a trader can anticipate that the stock price will change due to some news in a few days or weeks, he can make considerable profits if he plays his cards right. 

Most of the anticipation is based on experience, a deeper understanding of the world economy, and historical charts. Another important weapon swing traders use is the technical tools offered by Trading platforms. These technical analysis tools include moving averages, relative strength indexes (RSIs), Bollinger Bands, and candlestick patterns. Understanding these tools deeply and using them correctly can be the difference between a good and a bad trade. 

As explained earlier, swing trading is between day and long-term trading. Day traders take advantage of a volatile market and believe in quick stock turnover. On the other hand, long-term traders hold positions for months or years at a time. Both types of trading can be beneficial if done correctly. However, the chance of loss is much greater in day trading than in long-term trading. 

Key Components of Swing Trading Strategies

Swing trading strategies are only successful if the trader understands its concept and optimally uses the tools. There are three main components of a swing trade, which are as follows:

Entry and Exit Points

Entry and exit points are very important in swing trading. A strong entry and exit point can help traders capitalise on potential price swings. Each trader has their own way of choosing entry and exit points, so there is no hard and fast rule around it. They use several technical analysis tools in addition to world news that may affect stock prices when entering or exiting a trade. 

Risk Management

Risk management is crucial in all trading because it can help you curb losses. Several risk management and mitigation techniques can be implemented, including placing stop losses, diversifying your portfolio by trading different asset classes, optimal position sizing, and avoiding overtrading wherever possible. 

Role of Technical Analysis in Identifying Price Swings

Technical analysis is by far the most important component of swing trading. This is because when a swing trader holds a position for a few days, they look for potential profit-making exit points. These signals can be received via technical and fundamental analysis. For technical analysis, most trading platforms offer a range of tools that use complex mathematical algorithms and statistics. When a trader uses these tools in conjunction with world news and prior trading experience, something worthwhile can surely be predicted. 

Popular Swing Trading Strategies

Swing trading is incomplete without using technical analysis tools. These tools help traders predict trends, look for entry and exit points, enforce risk mitigation techniques, and more. A few of the most importantly used and known technical tools include Fibonacci retracement, support and resistance, channel trading, SMA crossovers, and MACD crossovers, and here he looks at them in detail:

Fibonacci Retracement

Fibonacci sequence is a sequence of numbers where each next number is the sum of the two preceding numbers, for example, 0, 1, 1, 2, 3, 5, 8, and so on. In trading, the Fibonacci Retracement is a technical analysis tool used to plot potential price reversals or pullbacks in the chart. This tool is used between the highest and the lowest points in the market over a certain period of time. When the Fibonacci retracement tool is used between these points, it projects horizontal lines between them, showing potential price reversal or pullback points. The key Fibonacci levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. This tool works best when used in conjunction with other technical analysis tools like support and resistance levels. 

Support and Resistance

The support and resistance levels in a chart are fundamentally important concepts for a trader to master, as they can greatly help understand market sentiment. The support level is the price level at which there is strong enough demand from the buyers, and, therefore, a further decline is positively prevented. However, resistance is the opposite of support levels. It is a price level at which intense selling pressure prevents a stock’s price from going any further in an upward direction. Both these levels can help understand how the broader market feels about a stock and how buyers and sellers deal with pressure. 

Channel Trading

Chanel trading involves trading between the support and resistance levels on a price chart. As explained, the price stops falling at the support level, and the resistance level stops increasing. However, the stock price can break these levels and go beyond them. Traders use these levels to gain entry and exit points in trades. The best strategy is to enter the trade near the support levels and exit the trade near the resistance levels. 

SMA Crossovers

SMA Crossovers stands for simple moving average crossovers and is a tool that calculates price averages over a certain period of time, ultimately smoothing out the chart. SMA makes it easier for traders to recognise the overall trend and make decisions. However, SMA crossovers are a step further, to the point where two moving averages collide or crossover, signalling potential price reversals. This tool is, therefore, great for spotting potential shifts in the market, but it works best when used with other technical tools. 

MACD Crossovers

MACD Crossovers stand for moving average convergence divergence crossovers, and they are one of the most useful technical analysis tools in swing trading and other markets. This tool helps traders understand the strength and direction of a trend. The MACD line visualises the difference between short-term and long-term moving averages. Based on this line, traders can identify whether the trend is bullish or bearish and potentially make a viable decision. 

Swing Trading vs. Other Trading Styles

There are two major trading strategies: day trading and long-term trading. Swing trading falls somewhere between the two. Here, we look at the specifics of each type and how they compare. 

Swing Trading

Swing trading is a type of trading where the trader holds a position for a short-to-medium term. This term can be anywhere from a few days to a few weeks. Swing traders utilise technical and fundamental analysis tools to look for entering and exiting points in the market. The main goal of swing trading is to profit based on a chunk of potential price movements in a volatile market.

Day Trading 

Day trading involves holding a position for a short time, which may be a few minutes or hours, but never more than a day. This type of trading is based on quick decision-making and taking advantage of a highly volatile market. It is full of potential but also comes with risk. 

Long-Term Trading 

As the name suggests, long-term trading involves holding a position for a long time, from a few weeks to months or even years. This type of trading is famous among investors and traders who believe in a stock’s integrity and potential to rise to a very profitable level. It is best for people who want to grow their wealth steadily on the side. 

All three trading strategies have great profit-making potential, but their main differences are the time it takes to hold a position and the risk involved. 

Advantages and Disadvantages of Swing Trading

Swing trading has a few advantages and disadvantages, and they are as follows:

Advantages of Swing Trading 

The biggest advantage of swing trading is that the trader does not need to stay in front of a screen and monitor each price movement closely. Since the trader will hold the position for some time and adjust when a significant price movement is anticipated, he can tend to his other commitments. 

The second most considerable advantage of swing trading is that it allows flexibility for the trader. The trader does not need to monitor the trades closely so they can continue their lives as usual and maintain a work-life balance. Another important thing to consider here is that, in swing trading, traders can potentially trade in markets that open at different times and in different time zones without the pressure of monitoring their opening and closing times, price movements, and more.

Disadvantages of Swing Trading

One of the biggest disadvantages of swing trading is that traders do not constantly monitor trades and price movements. This is because the stock markets are very volatile, and things can change overnight, if not in less time. Also, swing trading requires much patience and expertise to make a profit. 

How to Start Swing Trading

As a beginner swing trader, trading can be easy if you know where to start. Following is a step-by-step procedure to you follow for getting started with swing trading:

Step 1: Set Up Trading Account

The first step is to set up a trading account. Many great platforms are in the market today, but each has something unique. Each platform has associated fees, commissions, features, and security regulations. Do thorough research before settling on a platform. After selecting a brokerage platform, set up your account and provide accurate personal information. Once the platform has everything it needs, you will get an email of your account confirmation and activation. 

Step 2: Learn to Use the Software/Platform and Tools 

Before jumping into swing trading, learning how to use the platform and its tools is best. This will not only help you have a smooth trading experience but also help you make logical and profitable decisions. Familiarise yourself with the platform’s interface and features like charting tools, technical indicators, and market data feeds. Most platforms also offer demo accounts where you can simulate trading without using and risking real money. 

Step 3: Choose the Companies for the Trade

After thorough research, select a company that aligns with your trading goals, interests, and risk tolerance. Try to understand the driving factors behind these markets and their prices. Pick a few companies at the start and keep your research focused. This will help you make an informed choice. 

Step 4: Develop a Trading Plan

A trading plan is one of the most important trade steps. Start by outlining your goals for the trade and your risk tolerance, and think about your preferred trading style. Your trading plan and style will be refined over time, but it is important to learn from your mistakes and continue learning and researching. Focus on your strengths and develop a well-defined strategy that will help you stay disciplined. 

Step 5: Execute Your First Swing Trade

Once you feel comfortable with your knowledge, the selected company, and the platform, execute your first swing trade. Deploy risk mitigation strategies to minimise loss and monitor your trade closely. Use stop-loss orders, position sizing, and portfolio diversification to avoid mishaps. 

Swing trading is a type of trading where the trader holds a position for a short-to-medium term. This term can be anywhere from a few days to a few weeks. Swing traders utilise technical and fundamental analysis tools to look for entering and exiting points in the market. The main goal of swing trading is to profit based on a chunk of potential price movements in a volatile market. Understanding these concepts is essential if you are a beginner looking to start trading. Understanding these concepts is essential if you are a beginner looking to start trading.

If you are a beginner and are still deciding on a trading strategy for yourself, we recommend practising on a demo account. This will help you get accustomed to the trading platform of your choice and teach you to rectify your mistakes without any actual capital involved. Swing trading is an interesting strategy that can be observed in many scenarios. However, the trader should know the matter and understand the dynamics of the stocks and the stock market.