Beginner Swing Trading Strategy

Learn why swing trading strategy must always come before tactics.

Your strategy is your edge and why you are placing a new swing trade. Your tactics are how to enter and exit the trade.

If you are approaching swing trading the right way and thinking about it like a business, then your focus should be on your product, just like any business.

As a beginning swing trader, your product is your swing trading strategy, which gives you your edge in the market.  Identifying your strategy, your edge, hopefully gives you a leg up on the competition and provides the validation for a market participant to place a new swing trade.

A majority of swing trading strategies are derived from technical analysis or momentum catalysts.  An example of a technical analysis based swing trading strategy, could be buying the pullback of a stock in a strong uptrend, only when it touches its 50-day SMA.

An example of a momentum based swing strategy might be buying stocks in consolidation patterns after it has been upgraded by a major analyst.

While these swing strategies are different in concept, their goal is the same — to hopefully provide you with high probability swing trades consistent with your personality and ability.  This is your edge.

Swing Trading Strategies need Entry Tactics

Now that you have edge, it’s important to determine how you will enter trades. The best approach is to have a rules based system that helps maintain objectivity.  This is where information like trading price, volume, support and resistance, industry, etc come into focus. Use these criteria to filter out lower probability trades that fit your strategy.

Finally decide what approach you will use to enter and exit trades, so you can minimize risk and maximize profits. Decide if you are going to make decisions based on price targets/stops, support and resistance levels or technicals. What is important is an objective approach that compliments your attributes as a trader.

For example, maybe you have great entries but always exit your trade too early.  You may consider these ideas to improve your trading:

  •  If you execute exits based on price targets, think about using a trailing stop.
  •  If you execute exits based on support and resistance levels, maybe try using a larger time frame to find those levels.
  •  If you execute exits based on technicals, perhaps employ an oscillator to help with trend analysis.

A systematic and objective approach will keep you from getting too emotional and more often than not keep you out of bad situations.

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