Swing trading stocks is one of the most popular trading styles for people who want to make money in the market without staring at screens all day. Unlike day trading, swing trading lets you hold positions for days or weeks, capturing larger price moves while still being active in the markets. In this guide, we will cover everything you need to know to start swing trading stocks successfully.
What is Swing Trading Stocks?
Swing trading is a style of trading where you hold stocks for a few days to several weeks to profit from price swings. The goal is to capture a portion of a larger move, typically 5% to 20% gains, rather than trying to catch every small fluctuation.
Key difference from day trading: Swing traders hold positions overnight and through multiple trading sessions. This means you do not need to watch the market constantly, but you do need to manage the risk of overnight gaps.
Why Swing Trade Stocks?
Swing trading stocks offers several advantages that make it attractive to many traders:
- Time flexibility: You only need to check the market once or twice a day
- Larger profit potential: Catching multi-day moves can yield bigger gains per trade
- Lower stress: No need to make split-second decisions during market hours
- Works with a job: You can swing trade while working a full-time job
- Lower commission costs: Fewer trades mean lower total fees
How to Select Stocks for Swing Trading
Not all stocks are good for swing trading. You want stocks that move enough to give you profits but are not so volatile that they become unpredictable. Here is what to look for:
Volume Requirements
Look for stocks with average daily volume of at least 500,000 shares. Higher volume means better liquidity, tighter spreads, and easier entries and exits. Popular stocks like Apple, Microsoft, and major ETFs like SPY always have excellent volume.
Price Range
Stocks priced between $20 and $200 often work best for swing trading. Stocks under $20 can be more volatile and prone to manipulation. Stocks over $200 require more capital and may have smaller percentage moves.
Volatility Sweet Spot
You want stocks with enough volatility to move 5% or more in a few days. Check the Average True Range (ATR) indicator to measure volatility. A stock with a daily ATR of $2 on a $50 stock has 4% daily volatility, which is solid for swing trading.
Good Swing Trading Stock Criteria
- Average volume: 1 million+ shares per day
- Price: $30 to $150
- ATR: 2% to 5% of stock price
- Clear trend or pattern forming
- Upcoming catalyst (earnings, news) is optional but helpful
Best Chart Patterns for Swing Trading
Successful swing traders use chart patterns to identify high-probability setups. Here are the most reliable patterns:
Bull Flag Pattern
A bull flag forms after a strong upward move (the flagpole) followed by a brief consolidation that slopes slightly downward (the flag). When price breaks above the flag, it often continues the uptrend. This is one of the highest-probability swing trading patterns.
Cup and Handle
This pattern looks like a tea cup when viewed on a chart. The cup is a rounded bottom, and the handle is a small pullback before a breakout. Cup and handle patterns often lead to significant moves higher.
Double Bottom
A double bottom forms when a stock tests support twice and bounces both times. The pattern looks like a W on the chart. Buy when price breaks above the middle peak of the W.
Pullback to Moving Average
In an uptrend, stocks often pull back to the 20-day or 50-day moving average before continuing higher. Buying these pullbacks in strong stocks is a classic swing trading strategy.
Entry and Exit Strategies
Having clear rules for entries and exits is critical for swing trading success.
Entry Rules
- Wait for the pattern to complete before entering
- Use a breakout entry above resistance or a pullback entry to support
- Confirm with volume (breakouts should have above-average volume)
- Check the overall market direction before entering
Exit Rules
- Set a profit target of 10% to 20% or use a trailing stop
- Exit if the stock closes below your stop loss level
- Consider taking partial profits at the first resistance level
- Never let a winning trade turn into a big loser
Risk Management for Swing Traders
Risk management is what separates successful swing traders from gamblers. Follow these rules:
- Risk 1% to 2% per trade: Never risk more than 2% of your account on any single trade
- Use stop losses: Always know where you will exit if the trade goes wrong
- Position sizing: Calculate your position size based on your stop loss distance
- Limit open positions: Do not have more than 5 to 8 swing trades open at once
Position Sizing Example
Account size: $25,000. Risk per trade: 1% = $250
Stock price: $50. Stop loss: $47 (3 points risk)
Position size: $250 / $3 = 83 shares
Total position value: 83 x $50 = $4,150
Common Swing Trading Mistakes to Avoid
Learn from these common mistakes that hurt swing traders:
- Overtrading: Taking too many trades dilutes your edge and increases costs
- Ignoring the trend: Trading against the overall market trend lowers your win rate
- Moving stop losses: Widening your stop to avoid getting stopped out leads to bigger losses
- No trading plan: Every trade should follow a written plan with clear rules
- Emotional trading: Revenge trading after a loss or getting greedy after a win
Tools You Need for Swing Trading
Successful swing trading requires the right tools:
- Charting software: TradingView, ThinkorSwim, or similar platform with indicators
- Stock screener: To find stocks meeting your criteria
- News feed: To stay informed about earnings and major events
- Trade journal: To track and analyze your trades
Track Your Swing Trades Automatically
Pro Trader Dashboard syncs with your brokerage to track all your swing trades. See your win rate, average hold time, and which setups work best for you.
Getting Started: Your First Swing Trade
Here is a simple process for your first swing trade:
- Scan for stocks in uptrends pulling back to the 20-day moving average
- Wait for a bounce with increasing volume
- Enter when the stock closes above the previous day high
- Set stop loss below the recent swing low
- Target 2:1 or 3:1 reward to risk ratio
- Let the trade play out without micromanaging
Summary
Swing trading stocks is an excellent approach for traders who want to profit from market moves without being glued to their screens all day. Focus on selecting quality stocks with good volume and volatility, use proven chart patterns for entries, manage your risk carefully, and track every trade to improve over time.
Ready to learn more? Check out our guide on the best swing trade setups or learn about risk management for swing traders.