Swing trading, as we all know, can be quite profitable if we pick the appropriate stocks and execute them correctly. But do you know how to execute flawless swing trades that yield a profit? Without a suitable technique, the majority of traders, about 90% of them, lose money in intraday trading. However, another 60% of them lose money swing trading due to a lack of trading experience.
Do you want to learn how to make money with swing trading or positional trading?
To learn how to take more profitable swing trades, read this blog post. But first, let’s look at why swing trading has a higher success rate than intraday trading.
Swing Trading Is The Most Profitable Form Of Trading For What Reason?
Intraday trading, as you may know, is a difficult profession to master because there is so much up and down. When we trade intraday without a deeper grasp of the market structure, we also get a lot of false alarms. Swing trading, on the other hand, is as easy as it gets with proven signals. Not to mention, when you trade positionally, you can achieve a positive risk-reward ratio.
You might be on the lookout for the holy grail of swing trading right now. Here’s what you’ll need to make your swing trades profitable.
1) Adhere to the latest fashion trends.
Staying with the trend is the most important thing you can do to make money swing trading. If you’re trading bullish swing bets in a bearish market, the chances of your stop loss being hit are fairly significant. As a result, when placing positional bets, your rule of thumb should be to keep with the trend.
2) How to Study Price Action Properly
Many price action patterns can assist a trader in determining what the security or stock is attempting to accomplish, as well as the most likely targets and stop losses. If you’re on the lengthy side, you should be familiar with some patterns that perform well there. Similarly, if you’re shorting a stock or the market, you should learn how to use price actions that work.
Price action patterns such as the flag and pole, falling channel, wedge, inverted head and shoulders, and others function well in a trending market. Furthermore, always trade the retest of a breakout, and you will have a higher win percentage. Do you want to learn more about how to trade a breakout retest? This site is worth reading.
Do you want to learn more about price action patterns like these? To learn more, join our mentorship programme. Similarly, if you plan to trade the futures market short, you need be aware of negative price action patterns such as the head and shoulders, inverted flag and pole, rising channel, and so on. Half of your work is done once you know these patterns like the back of your hand. Do you want to know what happens in the second half? Here’s what’s left.
3) Determine a Reasonable Stop Loss and Target
Now that you’ve got a pattern, all you have to do is put it into action. That is, after all, the most difficult aspect of swing trading. People see a pattern and believe that if it is entered here, it will profit. The problem is that they don’t act, and then after ten days, they look at the stock and think, “Oh, it’s up 10%, it would’ve given me a nice profit.”
You don’t have to do this; instead, you should act on a strong setup when you see one. When you join a trade, you should place your stop loss around a significant pivot – either support or resistance, depending on which side of the trade you’re on.
Some people also set a stop loss and then forget about the trade.The trade continues to go in their favour, sometimes in their advantage, sometimes against them. It eventually grinds to a halt and hits the stop loss. That’s not someone you should be. Always keep an ideal departure target in mind. Swing trades should ideally have a profit aim of at least 5%.
It’s worth repeating: a minimum of 5% with a time limit. Yes, that is realistic rather than speculative. Why? People invest their hard-earned money in a bank FD for a year and receive a 5% annual return. How horrible can it be if you can achieve those returns on your investments in one or two weeks? When swing trading, don’t get greedy. If you spot a good chance, keep tracking your stop loss after each trade.
4) If Price Action Is The King, Data Is The Queen…!!
It’s not enough to understand a stock’s price action. You must also be familiar with the data. To stay current with market data, we at Trading Cafe India employ Tredcode, an innovative bespoke tool.
Here are some key data points to consider when preparing swing trades:
— For heavyweight stocks and indices like Bank Nifty, Nifty, Reliance, HDFC Bank, and others, always look into option chains. More than just price action and trading advice can be found in the option chain. Do you want to learn the secrets of trading data? Our trading guru Chinmay unearths the hidden treasures of option chain analysis in our daily YouTube videos.
— In addition to option chain analysis and price activity, you should keep an eye on volume. Before making any entries, check to see if there is any unusual activity in the stock volume data. When volume is low yet the price rises, it implies that the stock is being bought by weak hands or more retailers. Similarly, if a stock is downtrending yet volume is decreasing with each passing day, this indicates that weak hands are selling. What does the market do to get rid of the weak hands? It flings them away…!! As a result, you must be aware of the volume activity and place your positional bets properly.
5) In Positional Trading, Trading Psychology
If you can improve your trading psychology, you’ll be a better trader,
No one will be able to stop you from becoming a swing trader. What is the most important rule to mastering trading psychology? The holy grail is as follows:
Do not analyse your stock after you have entered a trade. The majority of retailers do this after taking a position in a stock. Do all of the necessary analysis – price action, data analysis, fundamental analysis – before entering a trade. Don’t let fear, greed, or joy control you once you’re inside. After you enter a trade, there are just two options: stop loss or target. This manner, you’ll be able to strengthen your trading psychology and engage in profitable swing trading.
So that’s the five-step approach you should take if you want to be successful at swing trading. Now, we’re hoping you’ll be able to make money swing trading. Do you want to learn more about multi-bagger swing trading?