Swing trading refers to a trading strategy that traders use to attempt and capitalize on price movements or swings. The idea of this methodology is to lock in profits before the market reverses and wipes them. In this article, I will explore some strategies that have proven to be effective in swing trading.
#1 Swing Trading Strategy
The first strategy involves swing trading in a range market where the market is caught between key levels of support and resistance.
- Pinpoint a range market
- Wait for the asset’s price to fall below support
- If it drops, wait for a sharp price rejection If the price breaks below support, then wait for a strong price rejection (a close above support)
- If it rejects, buy at the next candle open
- Place a stop-loss 1 ATR below the candle low and take profits before resistance
You want to take profits before resistance because you’re looking to capitalize only on 1 move/swing as that’s the whole idea of this trading strategy.
#2 Swing Trading Strategy
Compared to the previous strategy which involved a ranging market, this swing trading strategy is employed in a trending market.
With this strategy, you’re trying to make the move after the pullback when the trend is about to continue.
However, keep in mind that you’re not looking for any kind of trend. You want to make a move at a trend that has a deeper drawdown as it carries a better trading opportunity towards the upside.
That’s why you’re looking for a pullback at least towards the 50-period moving average (MA) or even deeper.
This is how it works:
- Detect a trend that follows the 50MA
- If the market moves towards the MA, wait for a bullish price rejection
- If it reverses, buy at the next candle
- Place your stop-loss 1 ATR below the candle low and lock in profits just before the swing high
It’s suggested to go with the 50MA as it’s widely followed by traders and it normally coincides with the previous resistance that became support, making it more important.
This doesn’t mean that you can’t use higher MAs with this strategy.
#3 Swing Trading Strategy
The idea of this last strategy is to make your move against the momentum. In other words, it’s a counter-trend approach.
To employ this strategy, follow these steps:
- Detect a strong momentum move into resistance that eliminates the previous high
- Identify a sharp price rejection as the candle creates a strong bearish close
- Sell at the next candle and place the stop-loss 1 ATR above the highs
- Lock in your profits before the closest swing low
In conclusion, the first strategy is used in range-bound markets, the second strategy revolves around the idea to try and make a profit in a trending market and the last strategy involves going against the momentum (counter-trend).
There’s no best strategy out of those three as it all depends on your trading style and one of them might work great for you while another one could work for another trade.
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