Swing trade is one of the most lucrative business ventures to become a millionaire. Although a lot of people tend to associate the profession with well to do individuals, even with little money, one can still make thousands of dollars. You first need to learn the tweaks from experts, and you’ll be good to go.
Below are six tips to help you perform better as a swing trader. Irrespective of whether you are a veteran or starting, implementing them is going to shred down your chances of making losses. Stick around and allow me to take you through them.
- Measure the depth of a swing
How far is the stock likely to move in the prior direction after reaching the swing point (pivot)? This is the question you should always ask yourself before trading.
The depth of a swing determines the future direction of the candle, especially after a prolonged trend. A shift in a candle is expected to move about halfway in the particular direction before the dropping line.
If the change is more than that, questions should be raised since stocks in strong trends encounter a lot of buying before hitting the halfway mark and should not move more than half in the opposite direction of the prior swing.
- Learn the 50% rule
Learning the 50% rule and looking at how far a candle has moved in the previous days is one of the best tips on swing trading. As mentioned earlier, in assessing the depth of the swing, whenever the candle moves 50% into in a particular direction, then pay much attention. Buy pullbacks and wait. Buyers are likely to flood in after the shift, and you’re in a better position to make profits.
- Gap and trap the price pattern
Any gaps in stock tell much about a stock chart. However, there is a vital gap called gap and trap. Here it’s where analyzing and pinpointing prices is critical.
The gap and trap that goes down at the open of trade and closes above the opening price which are usually easier to see on a stock chart.
Whenever there is a break at the opening of the trade caused by gap and trap, investors are likely to think that the stock would fall, which is usually not the case. At this point, buyers would be within the bounds of possibly stocking hence moving the trade up. By assessing the prior candle and noting the prolonged trend, you’re in a better position to trade effectively.
- Pay critical attention to similar consequent days
Keep your eyes on the ball! Stocks are likely to reverse directions after consequent down or up days. To stay on top of the game, these tips on swing trading about paying attention to sequences of similar days is crucial in ensuring you remain at the edge of your competitors. Always look out to buying stocks during such prolonged successions as the chances of a major are inevitable.
- Look for a broader range of candles
Candles mark significant shifts in a stock chart. Similarly, they are used to mark vital turning points at the end of the swing.
When the candle drops by wide range from the prior turning point, it’s believed to be the best time to consider buying pullbacks. This is because all traders who would have missed out on the shift are likely to come in for a second change making the stock value appreciate. However, it’s worthwhile first studying the trend of the candle before the full range.
- Analyze swing points
Swing points also referred to as swing pivots are positions where the reverse of the chart takes effect. It’s crucial to note that in the trade, not all pivots will occur at the same intervals. Your decision of purchasing pullbacks should be determined by the end of the prior swing trade pivot.
As a trader, you should strive to buy pullbacks when the stock wave has adequate space to run. Avoid sections with clustered candles. This way, you would at least have room to stop your breaks quickly.
Opting for pullbacks with minimal runs is risky as it limits your success as well as the room to stop breaks. Your chances of making a kill out of clustered candle wave would then be next to zero.
With the above tips, stocking shouldn’t sound like rocket science. Anyone can trade on the swing trade, regardless of their background in the field. It all requires a smart and keen individual to grease the wheels on the business. Get out and join the millionaires’ wagon in swing trade!
Nicole Hicks a graduate of UFT. She’s based in Toronto but travels much of the year. Nicole has written for NPR, Motherboard, MSN Money, and the Huffington Post. Nicole is a financial reporter, focusing on technology, national security, and policing.