Swing Trading Strategies

In this article, I’m going to show you a few swing trading strategies that I personally use and profitable for the past few years. The strategies work well on penny stocks as well as regular stocks. The major differences is that I hold penny stocks much shorter than regular stocks because they are much riskier. Before we go any further, let’s first define what swing trading is.

What is Swing Trading

Swing trading is a short term trading method to trade the stock or the options market. The typical trading period is anywhere from 2 days to 2 weeks. This is different than day trading where the holding time is anywhere from a few seconds to 1 day. Swing trading focuses on short term price movement and make a bet based the chart patterns and technical indicators. Swing trading is different than investing because swing trading does not care about how a company is doing whereas investing requires you to study a company fundamental thoroughly and then buy and hold a stock for a long time.

Swing Trading Stocks

Most of the swing trading strategies involved using technical analysis and stock chart patterns to find trade setups and exit strategies.

1. Trend Following Strategy – this is the most popular type of swing trading strategy where you recognize a trending stock and ride with the trend. For example, the stock TNA is in an uptrend and it is now trading at the bottom of the trend line. As long as the stock trades above the trend line, it is a good stock to trade. You would want to buy the stock around the current price and try to make a profit when the stock go back up. If the stock breaks below the trend line with strong volume, you would want to sell it because the trend line is broken and it is no longer a trending stock. On the other hand, if the stock breaks lower with low volume, it is okay hold a little longer because it could be a false signal that the trend is broken.


2. Cycle Trading Strategy – When a stock is trading in cycles, I would like to buy the stock around the bottom or the support level. For example, if a stock is trading between $5-$10 for a while, I would want to buy it the next time it trades near the $5 level. For example, ABX is trading in the range of $10-$13.5 since the beginner of this year. It is safe to say that $10 is the support and $13.5 is the resistance for this stock. I would want to trade this stock since the stock is approaching to the $10 level again. The stop loss level would be a little below the $10, if the stock breaks lower, then I would sell it to prevent further losses.ABX

3. Candlestick Trading – The Japanese Candlestick is a popular charting techniques that traders to find trade setups. It is more useful than the traditional bar charts because it is easier to see and use. Candlestick patterns is a set of patterns that offers bullish and bearish signals. Here are a few of my favorite candlestick patterns.


Bullish Engulfing pattern is a bullish pattern when it occurs on a down trend. The pattern signals a reversal trend coming especially when the volume is high. 

Bearish Engulfing pattern is a bearish pattern when it occurs on a uptrend. The pattern signals a reversal trend. When the volume is high, the pattern is more accurate.

The doji pattern is a reversal trend that happens for both the uptrend and down trend. When the doji pattern occurs on an uptrend, it is a bearish signal. When the doji pattern occurs on a down trend, it is a bullish signal. Also, the signal is stronger when the volume is higher than the average trading volume. 

Let’s look at example, the stock ABX has a Bullish Engulfing pattern in the middle of March. The stock was in a down trend, and the volume is strong when the bullish engulfing pattern occurs. This signals strength and the stock went from $11 to $13.5 within 2 months.


There are many more candlestick patterns, but I won’t get into the details in this post. I will discuss candlestick patterns in more detail in a future post.

You can check out Profitable Candlestick Trading to learn more.

4. Breakout Trading Strategy – When a stock is trading in the range for a while and then it breaks higher with good volume. This is a good breakout setup. For example, if a stock is trading in the $5-$10 range for a long time, and then it breaks higher one day, then I will consider buying especially when the volume is high. False breakout often happens when the volume is low. That is the stock breaks higher temporary and then pull back under the $10 price level, so watch out. Trade breakouts only when the volume is high and above the average trading volume.

For example, the stock HSC has a breakout yesterday with strong volume. This is a good time to trade the stock. The stock was trading in the consolidation area since Feb with a resistance around $17.5. After yesterday’s breakout, the resistance becomes the new support, so if HSC drop below this new support level with strong volume, it is time to sell as the stock is no longer consider as a breakout stock.


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