What is Swing Trading?

Swing Trading is buying and selling common stock or options on stocks, indexes and ETFs for an expected holding period that could last from a couple days to a few weeks. More succinctly, the expected holding period for a swingtrade is 2 to 20 bars on a daily chart.

Your decision inputs are more technical than fundamental:

  • volatility
  • momentum
  • market location
  • direction
  • the rate of change of price.

what is swing trading arrow graphicQualifications about the company or the industry are not considered except as they may relate directly to certain corporate events like earnings announcements, which categorically should be avoided because of inflated volvatility. You take what the market gives you on the trade that you’re in, and then you move on to the next swing trade. You have no allegiance to any company or stock other than for its consistency as a trading vehicle.

The successful swing trader is as at ease on the short side of the market with bearish swing trades as he is on the long side with bullish swing trades. The competent swing trader must be as comfortable selling option premium as he is with buying calls and puts. Trends do not continue in either direction forever. Giving up on selling option premium or going to the short side before the game even begins not only deprives you of many trading opportunities, but it also creates a subtle mindset that is always hoping for, and fashioning the possibility of a new bullish trend regardless of evidence to the contrary.

What then is required to become a successful swing trader?

You must determine when the stock or ETF of interest is trending, and whether the trend is gaining or losing momentum or has moved into a favorable market location within its Trading Range. The concept of trend is straightforward enough but it still remains the source of immeasurable angst, especially among novice traders. The individual trading style you develop, and every swing trader is an individual, will likely flow from how you come to characterize trend.

Based on your analysis of the state of trend you can then devise an objective strategy consistent with your trading style that clearly defines set-up conditions, entry rules, add-on rules, risk-management rules, and exit rules.

When you come down to it, all the chart styles, indicators, and fancy studies in Swing Master/Options Master Chartist are here to help you determine the state of the trend and the location of the underlying within its Trading Range, and to make an objective and reasoned decision of what you should do about it. The trading methods already built into Swing Master/Options Master Chartist almost force you to have a trading plan and to follow the rules.

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