If you are new to the world of swing trading, it is certainly in your best interest to know the best tips that can help you become a successful swing trader. Swing trading is different from other trading markets, especially regarding the fact that you get to hold your trades for days and even weeks.
Read on to learn more about swing trading and the best tips that can help you become a successful swing trader.
Understanding the Fundamentals of Swing Trading
Before we explore the list of tips, you must understand the fundamentals of swing trading in order to be a successful trader, even as a beginner trader. As mentioned earlier, swing trading enables traders to hold their trading positions for several days and weeks with the aim of capturing medium-term or short-term profits in their respective financial securities.
This aspect emphasizes the importance of having good technical analysis skills to make smart swing trading decisions.
Best Tips to Get Started As A Beginner Swing Trader
Let us explore the best tips that can help you get started as a beginner swing trader.
Select the Right Stocks
The first tip is to select the right stocks. When choosing stocks for swing trading, you must keep in mind two variables: volatility and market liquidity. With that said, the best potential candidates for swing trading are typically large-cap stocks, as these are the most actively traded stocks. What this means is that in active trading markets, these stocks carry a high transaction volume.
You must remember that if a selected stock has poor liquidity, it means that it lacks action in the trade book of a broker, which is why it can become incredibly difficult to sell the stock. Even if you do succeed at selling the stock, you must offer it at a massive price discount.
Select the Right Market
Apart from selecting the right stocks, you must also be mindful when selecting the market. With that said, you should understand that financial markets are typically affected by three long-term trends: the “bull market”, the “bear market”, and a third market that is somewhere in between the two markets we mentioned before. Your respective swing trading strategy will be different for each trend.
Recognize Trading Patterns
Understandably, you want to become a successful swing trader, which is why you must understand the importance of recognizing swing trading patterns. These patterns exhibit potential price fluctuations. For instance, the “head and shoulders” patterns signal a price reversal, which is when the price breaks down below the neckline. Similarly, the “double bottom” and “double top” patterns indicate support and resistance levels.
Control Your Impulses
Even as a beginner swing trader, you should understand the importance of patience, dedication, and the ability to control your impulses. As a matter of fact, you should know that emotional control is a core key in swing trading. What this means is that as a beginner swing trader, you must practice your trading strategy and plan before following it with actual trading. Similarly, you must set realistic goals when following your trade plan.
Understanding risk management, such as the use of stop loss orders, is as important as the ability to avoid impulsive decision-making.
