Looking for some tips for swing trading stocks? You’ve come to the right place. Today, we’re going to share the top swing trading tips we wish we discovered earlier in our careers. Whether you’re just getting started with swing trading or you haven’t been seeing the returns you’d like, you’ll feel more confident in your abilities after reading through this article!
If you employ all the tips on swing trading we lay out below, you’ll be able to minimize your losses and maximize profits – with less work! Wouldn’t that be nice? So – let’s not waste any time.
The Top Swing Trading Tips for New & Seasoned Traders Alike
This article is being written primarily for new traders who are seeking direction. But even veteran investors can benefit from a quick refresher – as it’s all too easy to stray from the tried-and-true principles of swing trading. Here’s the first tip on swing trading – tailored specifically to new investors.
Practice With Paper First
We know you’re eager to start seeing swing trading profits as fast as possible – and trust us, you’ll get there soon enough. But if you haven’t practiced with paper trading first, we recommend you do so. Yes – even if you took the time to learn swing trading with a paid course.
Paper trading is when you use real-time stock market data but without real money at stake. You can do this in any of the best platforms for swing trading – like VectorVest. This way, you have the opportunity to practice those beginner trading strategies you’ve spent time learning about and develop your own swing trading style before putting any of your hard-earned cash on the line.
The reason this is so important is that you simply cannot replicate the real-time conditions of trading the stock market. Watching your favorite traders’ live trading sessions is a great way to see the thought process in action, but until you do it yourself, you won’t get a full sense of how high-stakes swing trading can be. It’s better to go through these early trials and tribulations with fake money.
After you’ve seen consistent results in paper trading and you feel confident, you can follow the next swing trading tip we have to offer.
Whether you’re just swing trading on the side as a way to earn supplemental income or you want to make a full-time living from this investing strategy, we recommend you start with small account trading.
Yes – that means your returns will be low at first. But it also means your risk is lower.
It’s easier to stomach a 10% loss if your total account size is under a thousand dollars. Of course, only you can determine what you’re comfortable losing. But letting your account grow slowly over time is the best way to prevent the gut-wrenching losses that are more likely to occur early on.
Follow Market Direction
The overall stock market ebbs and flows – and this is something you can easily see on any given day within the VectorVest system. We have a stock market sentiment indicator on display around the clock so you can see when conditions are favorable, and when it may be best to sit on the sidelines.
Sure, there is always a way to make money in the stock market – you can learn about shorting stocks to make money even when they’re falling in value. But early on, you’ll have far better success following market direction – and this leads into the next tip on swing trading we want to offer.
Trade Undervalued Stocks That are Rising in Value
This is one of the most basic principles of swing trading – and you’ve probably already heard this before. But, it’s so important that we’re going to say it again. The best way to make money as a swing trader is to buy undervalued stocks that are rising in value – with momentum behind them.
Of course, this is easier said than done. But that’s the challenge of swing trading – finding the right swing trading stock picks at the right time. In order to do that, you’ll need to use the best indicators for swing trading – like moving averages. Or you can make things easier on yourself and read the final tip we share today – it will make your life so much easier!
Now, similar to the last tip we offered, it is possible to make money by selling stocks that are overvalued and falling value with shorting strategies. Save those for when you’re more experienced. For now, just stick with the tried-and-true principles that never fail.
Zoom Out to Get the Full Picture
As a swing trader, you’re only interested in capitalizing on short-term price volatility along the overall trajectory of a stock’s price movement. But that doesn’t mean you should only look at the weekly or monthly time frame when assessing opportunities. In fact, zooming out and getting the full picture of a stock’s history is the best way to identify trends and find your entry and exit.
When swing trading stocks, many of the most successful swing traders rely on a 2-year weekly chart. You can learn more in our article addressing a common question – what is the best time frame for swing trading?
Act Fast When You Spot an Opportunity
It’s imperative that before you make your position in a stock, you validate the opportunity and confirm a positive price trend has formed. But, many new traders are guilty of falling victim to decision overwhelm – and waiting too long, missing their opportunity.
Think about it like this – there are thousands (if not millions) of other swing traders looking at the same opportunities you are. If you wait too long, their activity will end up pushing the stock to a level where it’s overbought – at which point that trend will vanish. You’ll have missed your window.
All of this is to say that when you spot an opportunity, quickly confirm the potential and make your entry. Even if you sacrifice a few percentage points, it’s worth it to avoid missing the window altogether.
Have a Plan Before You Make Your Entry
One of the reasons most swing traders fail (besides giving up too early because they had misconceptions of how easy swing trading would be) is because they try and play their trades by ear. They’ll enter their position, and then monitor the position closely and wait for a good opportunity to exit.
This often results in getting stuck in the stock too long and not reaping the full return that was possible. The best way to avoid this is to go into every trade with a clear plan of action. You should have your entry and exit already mapped out.
Sure, you can make changes on the fly as you see fit – but sticking to your plan allows you to realize a profit when it’s there and cut losses when it’s time. The more you stray from your original trading plan, the more opportunity for error there is. You won’t have to stress about when to sell swing trading stocks if you know your exit point going into the play.
Use Stop Losses and Take Profits
One of the best ways to ensure you actually stick to your trading plan and don’t get in your own way is to use stop losses and take profits on every trade you make.
The stop loss protects you from unexpected volatility sending share prices tanking. If you aren’t able to get to your computer or phone fast enough when your alert strikes, you’ll automatically have closed out your position and taken a loss you’re comfortable with.
On the other hand, take profit orders will trigger when the stock price rises above a certain point – reaching a profit target you’re satisfied with. This prevents you from getting greedy and trying to squeeze out more profit as a trend starts to reach its peak.
Eliminate Emotion From Your Decision-Making
To this point, a lot of our tips for swing trading stocks have been about removing human error from your investing strategy – creating a plan and sticking to it, setting automated orders, etc. The reason for this? Humans are inherently emotional – and that emotion often does more harm than good.
There are two possible ways emotion can affect you negatively as an investor – the most common example of this is getting an emotional attachment to a stock that you thought was a great opportunity. But once you enter your position, your plan doesn’t go how you’d hoped – and the trend you validated (perhaps incorrectly) quickly reverses and you go in the red. But you were so high on that stock – surely it’ll turn around, right?
It rarely does. This emotional attachment can lead to costly account blow-ups. This is a huge reason why we encourage you to set stop losses on all your trades at just 2-5% – depending on your own risk tolerance.
On the other hand, you can get emotional when watching a stock rise dramatically in value – past your profit target even! You set out with a goal of making 5%, but that stock won’t slow down…it’s gone up 7%, 10%, and beyond – looking like it’s going to go higher and higher.
But – that trend will end eventually. And trying to squeeze out every last percentage point can spell disaster for swing traders as your position is exposed to overnight or weekend fluctuations. The last thing you want is to open your dashboard the next day to see that all those gains you could have realized have vanished.
To prevent this, you can use take profit orders and sell portions of your position slowly. Sell the profits you’ve made and leave the principal invested if you’d like – but always take profits when they’re on the table. The best way to ensure you eliminate emotion from your strategy, though, is by following the final swing trading tip we have for you below…
Invest in Quality Stock Forecasting Software
The best swing traders don’t guess when it comes to what stocks to buy and sell – they rely on sound strategies that are proven to work. And while you can do all the manual work of technical stock analysis, there is actually a better way in this day and age.
What if we told you that you could minimize losses and maximize profits with less work? You’d probably think it was too good to be true – but it’s not. You just need reliable stock analysis software to do all the heavy lifting. And there is no better investment you can make in your own trading strategy than VectorVest.
It tells you what to buy, when to buy it, and when to sell it. This system has outperformed the S&P 500 for over two decades now – earning 10x the return! It’s helped countless swing traders take their strategy to a level they didn’t even know was possible – and it can do the same for you.
The best part? No more wasted time in front of your screen. You’re given effortless insights into stocks through 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). They sit on a scale of 0.00-2.00, with 1.00 being the average. Pick stocks over the average and win more trades! Or, better yet, just follow the clear buy, sell, or hold recommendation VectorVest offers for any given stock at any given time.
As if it couldn’t get any easier, you can find winning opportunities on autopilot with our pre-built stock screeners. These feature the top-rated stocks in a given category on any given day. Maybe you want to trade stocks in a specific industry – or, maybe you just want stocks with the best timing. Perhaps you’re getting started with personal retirement planning and you want to add the safest stocks to your portfolio. No matter your goals, VectorVest can help you get there effortlessly.
And, you never have to stress about missing an opportunity again. VectorVest offers a stock advisor app to help you keep your investments by your side no matter where you are. See it in action through a free stock analysis today.
Wrapping up Our Tips for Swing Trading Stocks
There you have it – the top tips for swing trading stocks. Whether you’re a complete beginner looking to make your first trade or you just want to get back on the right track after a poor period of performance- we hope our swing trading tips grant you confidence and clarity on how to make the most of this investment strategy. In summary:
- Practice with paper first
- Start small when you do use real money
- Follow market direction
- Trade undervalued stocks rising in value
- Zoom out during analysis
- Act fast when an opportunity presents itself
- Have a plan before making your entry
- Use stop losses & take profits to eliminate human error
- Eliminate emotion from your strategy
- Invest in yourself with the best stock forecasting software available
By arming yourself with these swing trading tips, you’ll be well on your way to earning consistent profits in the stock market. So what are you waiting for? Get to work!
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