Tales of a Technician: The Art of Swing Trading
February 25, 2019
Last Update: November 2021.
One of the simplest ways to define what type of trader you are is by your time frame. Are you buying and holding for years, months, days, or minutes? In other words, what is the average duration of your positions? Long ago our trading forebearers laid out the classification for trader types. Here are the most popular categories with accompanying definitions.
- Investor: Someone who buys and holds for years. Their aim is to capture the long-term appreciation of asset prices.
- Position Trader: Someone who buys and holds for weeks to month. Their aim is to ride trends for however long they may last.
- Swing Trader: Someone who buys and holds for multiple days. Their aim is to capitalize on the up and downswings that define a trend.
- Day Trader: Someone who buys and holds for minutes to hours. Their aim is to capitalize on intraday movement and be out of their positions by the closing bell.
Swing Away
To fully grasp the power of swing trading, you must first understand
- Multiple candles make a swing
- Multiple swings make a trend
Survey any stock chart and you’ll quickly discover that equity prices don’t move straight up or straight down. Instead, they rotate between upswings and downswings. Typically a swing consists of 3 to 7 candles. Of course, that’s the average. Sometimes, particularly when momentum has taken hold, prices can push in one direction for 8, 9, or even 10 days before pausing or retracing.
The principal objective of a swing trader is to capitalize on these swings. That might consist of buying a strong uptrend that is bouncing off of support or breaking above key resistance – and then riding the swing for multiple days until prices pivot back in the other direction. Alternatively, a bearish swing trade might involve selling a downtrend as it falls off of resistance or breaks below a key support level.
Here’s a snapshot of an uptrend in CRM:
Scouting Reports
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Most of the setups lend themselves very well to swing trading. They offer low risk/high reward patterns that are often poised to make 3 to 7-day moves in one direction.
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Trading for Beginners: The basics of Swing Trading [FREE 101 Webinar]
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Topics covered:
- What is Swing Trading?
- Types of Trends
- Uptrends
- Downtrends
- Support and Resistance
- Trading System Rules
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