Success is not achieved by increasing your knowledge alone – it is attained by incorporating it in tandem with an increased understanding of yourself. – Siby Varghese

One of the most respected and successful entrepreneurs, wealth consultants & experienced traders, Siby Varghese, shares his expert opinion on how swing trading can accelerate your wealth creation.

Siby has over 10+ years of experience in diverse sectors of the investment industry including banking, financial management, share market education and professional trading. An exceptional motivator, mentor and technically competent trader, Siby is in his element when assisting others to achieve their financial goals.

The most significant consideration for traders when investing in the stock market is to enter or exit a trade as early as possible and at the lowest possible risk. This makes buying a stock when it suggests that it will go up in a continuous uptrend or selling with the greatest chance when it indicates that it will fall in a continuous downtrend. While in principle this is fantastic, how do you put this into practice?

That’s where integrating swing trading strategies into your trading will dramatically boost your results and give you the biggest benefit.

By incorporating an element of swing trading in their portfolio, investors can adapt their strategy to match the new investing landscape. This growth will both alleviate increased uncertainty and accelerate their wealth creation.

What Is Swing Trading?

Swing trading is a trading style that tries to capture short- to medium-term returns in a portfolio (or other financial instruments) for a few days to several weeks. To look for trading opportunities, swing traders mainly use technical analysis. In addition to evaluating price trends and patterns, these traders can use fundamental analysis.

Day Trading Vs. Swing Trading

The difference between swing trading and day trading is the holding period for positions, normally. Often, swing trading requires at least one overnight hold, while day traders close positions until the market closes. Day trading positions are confined to a single day to generalize, whereas swing trading requires holding for several days to weeks.

By holding overnight the swing trader imposes the uncertainty of overnight risk such as spreads up or down against the spot. Swing trades are typically conducted in a lower position size by taking on the overnight chance relative to day trading (assuming the two traders have similarly sized accounts). Usually, day traders use greater position sizes and can use a 25 per cent day trading margin.

Swing traders also have recourse to margin or leverage of 50 per cent. This means that for a deal of a current valuation of $50,000, for example, if the dealer is accepted for margin trading, they only need to bring up $25,000 in the money.

Swing Trading Strategy

Swing trading got its name because it seeks to profit either upward or downward from market oscillations or swings. Swing traders, including day traders, use a variety of technical trading methods only for a time that is similar to position trading.

Swing traders use commonly proposed tools such as Bollinger Bands, Fibonacci Retracement, moving oscillators to develop strategies. In addition to other indicators, traders often keep a close eye on evolving multi-day chart patterns to formulate a good trading strategy, such as,

• Head and shoulders pattern
• Flag pattern
• Cup and handle pattern
• Triangle pattern
• Moving Average Crossover

Let’s take a peek at simple swing trading approaches.

Fibonacci Retracement

Swing trading traders understand that markets often appear to retrace before reversing again at various speeds. Fibonacci retracement lines aid traders in defining levels of support and opposition. At various percentage ranges, traders draw horizontal lines, such as 23.6 percentage, 38.2 percentage, and 61.8 percentage, to define possible reversal levels. For example, a trader will arrange a short sell at 61.8 Fibonacci line while the trend is down, acting as a level of resistance, where the stock retraces before bouncing off and leaving when the market touches the 23.6 Fibonacci line or the level of support.

Bollinger Bands Method

Bollinger Bands (BB) are price bands positioned on both sides of the trend line of the moving average. They provide a range between the fluctuations of asset values. To schedule entry and exit points in the market, swing traders use Bollinger Bands.

Channel Trading

Channel trading is a basic strategy involving trading assets that display a clear trend line and trading within a channel. For instance, when the trend line is downward and reaches the upper limit of the channel before dropping off, you can schedule a sale. As the instrument still trades along with pattern indications, traders use channel trading.

Each swing trader eventually creates a plan and strategy that gives them an advantage over several trades. This includes searching for trading patterns that appear to lead to predictable fluctuations in the price of the commodity.

This is not simple, and every time, no plan or setup works. It’s not necessary to win every time with a desirable risk/reward. The more desirable the risk/reward of a trading strategy is, the fewer times it has to win over multiple trades to earn an overall benefit.

Advantages Of Swing Trading

• For people who are working during trading hours and still want to be engaged, relatively short-term traders, swing trading can be a great trading style.
• Although overnight risk can be a drawback of swing trading, if they break in the way of your trade, the gaps which sometimes occur overnight can also lead to greater productivity. This enables you to make fast, large, overnight cash with day trading that is not available.
• Swing trading allows you to take more time without the time constraints of day trading to evaluate the market that you are trading and make trading decisions in a more relaxed way.

The Bottom Line On Swing Trading Stocks

Swing trading is an amazing choice for day trading.  It takes much less time and you shouldn’t have to be welded all day to the markets. And it can deliver a serious opportunity to a floundering portfolio when done successfully, particularly when the markets are unpredictable. Good swing traders are skilled at harnessing and turning that uncertainty into profit when the markets are whipsawing around.

The main disadvantage of swing trading is that longer trends that can send the price of a stock upwards can be missed. But a good swing trader will have plenty of trades in the bag to compensate for any overlooked gains when employed correctly, explains Siby.