how to get started with swing trading

Because online trading is primarily based on tactics, many methods have been developed by experts with the aim of optimising the chances of winning for investors. Swing trading is one of the trading techniques that have been around for a very long time. What is it exactly? And how to apply it? The answers…

Definition and principle of swing trading

 

As the name suggests, the swing trading method involves trading by following the “swings” of the market, that is, its ups and downs. This stock market investment technique has already been used since the 19th century and is mainly applied in very short trading cycles.

It is particularly appreciated by day traders and private traders, but its speed does not really adapt to professionals, whose negotiations are often very large. Generally speaking, swing trading involves following the back and forth waves in the stock market.

It is about trading in the direction of the current, which can be up, down or stagnant. Depending on the trend displayed, the trader will then have the choice between a sell or a buy. The decision is made quickly, just at the right time.

67% of retail investor accounts lose money when trading CFDs with this provider. You have to ask yourself if you can afford to take the high risk of losing your money.

Swing Trading: 3 steps

Like any other trading method, the swing trading technique requires a few points to be observed to be successful:

 

Swing Trading Step 1: Determine the Trend with Charles Dow Theory

 

The Dow Theory is the very basis of swing trading, making it easy to find the market trend. Its principle is simple: it is necessary to refer to the high points and to the low points of the course of evolution of the course, and if the tops and the troughs are more and more high, the tendency is upward, otherwise, in the opposite case, it is bearish. It suffices to establish a curve, using one of the analysis tools offered in trading.

 

Swing Trading Step 2: Study Impulses and Corrections

 

Apart from a simple downtrend or uptrend, there are also impulses and corrections, which need to be considered. The impulses, it is when the curve shows a high top, but a low trough and that the movements follow the direction of evolution of the price. Corrections, on the other hand, go in the opposite direction and are often associated with positional sales by investors. Most of the time, buying after corrections turns out to be a winner as prices fall before an uptrend resumes.

 

Swing Trading Step 3: Apply good money management

 

And finally, the last step is to clearly define your earning objectives and limit the risk of loss. As a general rule, the risk should not exceed 2% per trade. Caution is always required, swing trading will be easier to use on CFDs than on a currency, for example. Using this technique on binary options once again requires mastery and a good knowledge of the assets being traded.

67% of retail investor accounts lose money when trading CFDs with this provider. You have to ask yourself if you can afford to take the high risk of losing your money.

We remind you that trading in the short term and in products with high volatility can entail great risks and losses. Before you get started with these techniques, don't forget to do the preliminary market analyses.

illustration trading swing etoro

Trading with eToro for example gives you access to many useful indicators in swing trading

Choosing a broker for swing trading

 

Swing Trading: the criteria to look out for

 

Before choosing a broker to trade online via a swing trading strategy, it is essential to review some basic principles, valid for any trader activity:

  • The user should only invest the money he does not need;

  • Determine the desired financial goals;

  • Apply a money management (risk management) reasonable;

  • Train yourself to determine if the swing trading strategy is the right approach, depending on the stock exchange concerned: forex, CFDs, Stocks Markets, crypto currencies.
     

When these few items are verified, it is indeed important to choose a broker that perfectly meets the needs of users who apply a swing trading method. Future investors should pay special attention to these few intrinsic points of brokers before opening a real money trading account. eToro is a trading site that offers comprehensive and affordable service on an intuitive platform.

Adapted tools

Online trading is a very risky activity, due to the high volatility of the markets. This is why it is unreasonable to go public without having all the trading tools necessary to manage this risk.

A good broker should offer their clients every flagship swing trading indicator: moving averages, RSI (Relative Strength Index), candlesticks, Fibonacci retracements and volumes. These indicators are very important for carrying out precise technical analyses on a medium-term position (stocks, crypto currencies in particular) or on forex swing trading (beware of overnight fees).

Appropriate brokerage fees

For traders, the number 1 goal is to make a profit. It also involves reasonable brokerage fees which do not undermine the gains of the positions. This is an important point to watch out for before committing to a swing trading broker. Positions, held open over several days, may incur fairly heavy additional commissions. A point not to be overlooked.

The CFD trading is suitable for scalping as inexpensive costs at many online brokers (including eToro) if very firm positions at the end of trading session. The stock or crypto market, with a broker who offers to buy real ones, is potentially more profitable in swing trading because it is little impacted by fees or commissions.

An educational resource center

Succeeding in online trading requires proper training in the various more or less advanced concepts inherent in this activity. Users should be able to benefit from swing trading training directly through the educational resource center offered by their online broker.

A good training allows you to understand the mechanics of the method (with swing trading definition for example), to know if it is made for you and to get the most out of it. The demo account is a very important option, which should not be neglected to train and test a strategy. The objective is to establish a coherent investment plan which allows to generate profits, with a graphical analysis with indicators of price movements.

Swing Trading: Our top 3 brokers

 

We have selected the 3 best brokers, in our opinion, who offer the best conditions to apply a swing trading strategy with seriousness and knowledge. Discover these trading sites without further ado.

top brokers for swing trading

The best swing trading strategies


There is no single swing trading method. Several options are possible to minimise the risk of capital losses, and increase profits over longer periods. On CFD, forex, stock or crypto, it is possible to get away with success by being rigorous. Our opinion on 4 indicators perfectly suited to controlled and profitable swing trading.


Fibonacci


Fibonacci or Fibonacci Retracements is a technical indicator that offers the possibility of basing itself on price levels. The Fibonacci retracements materialises horizontal lines that represent price levels, which are highly likely to be key points: support or resistance. The calculation of this retracements is based on the famous Fibonacci numbers. Each level corresponds to a precise percentage of probability:
 

  • Level 1 = 23.6%

  • Level 2 = 38.2%

  • Level 3: = 61.8%

  • Level 4 = 78.6%.


Support and resistance in swing trading


Support and resistance are technical indicators that are widely used in forex swing trading, or in other day trading strategies (scalping) for example. This helps determine the highest and lowest points of a price point. This is an opportunity to take advantage of small gaps (up or down) as part of a global trend. In addition, with a medium or long term vision, it is important to remain vigilant on possible major trend movements. Supports and resistances are important information to deal with.


Channel trading 


This method allows the trader to create a channel using 2 trend lines. One that indicates the highest point (support) and the lowest point (resistance). Depending on the price level at the time of opening the position, a hit above the support line is a buy signal; a hit below the resistance line is a sell signal.


Moving Averages in swing trading


The moving averages are a technical indicator widely used by traders swing trading. It is the ideal tool to precisely define the trend of an asset. Moving averages exclude outliers, which can occur in the markets, in order to smooth with an average price.
 

This average price is constantly readjusted with the addition of real-time price level data. When the observed price exceeds that of the average price, it is often considered that the trend is upward. Conversely, if the observed price is below the threshold of the average price, opinions agree for a downward trend.