I have been doing Swing Trading for more than 3 years now. But yet most of the people are confused and don’t know what is Swing Trading means and how can they accomplish this skill to earn in millions of dollar. But if practised with patience and discipline with proper risk management. So, today I will discuss what swing trading means and what strategies you can follow to get the gains in the stock market.
What is Trading in the Stock Market?
Trading is a practice which is followed by either a seasoned trader or from trader trading in a specific time period. Trading is all about buying and selling the stock within a limited period of time. So, Trading cannot be termed as an investment in stocks. Stock Investment is for a longer period and you generally buy a stock and keep it for years so that it increases and change your fortune.
Trading requires discipline and guidelines to be in profit for a longer time in stock market else it will lead to huge loss and maybe later you will not be able to recover. So if we go by English meaning just Trading means selling or buying of any commodity or product. And hence that completes a trade and transaction between people or company.
Is Swing Trading Profitable and How to achieve it
So the basic question arises in all the traders or newbies for trading that what sort of strategy they should follow in order to achieve high profits. High Profits can be achieved in Swing Trading but only when you set certain rules to follow. It’s always better to have risk management on your capital which should not be more than 2% Loss on entire capital.
Let take a scenario, if you are doing swing trading and keep you profit percentage as 10% and stop loss as 2%. Then if you take a total of 10 trades and you are only 40-50% hitting the trade correct what it will lead to with capital of $10000.
As you can see in the above table where our strategy is to get out of the trade at 10% profit or at 2% loss. And above my strategy as the only probability of 40%. Yet we are profitable with more than 13% on the entire capital. Which are great profits with strategy just with a probability of 40%.
So if you got any strategy which as higher win probability then what will obviously lead to huge profits of more than 20-30% on entire capital. But if your strategy is having less winning probability i.e. less than or equal to 30% then you need to change strategy to follow.
What is Swing Trading:
Let’s talk about what swing are we actually talking about. So swing trading follows Moving Averages on the chart of the stock. For example, if I put moving average of 50 days on the chart of the stock apple then we can see whenever the stock crosses the Moving average from down to top. Then you buy the stock for a profit. And if the stock crosses the 50-day moving average downwards then you sell the stock for a profit.
Let analyze a chart to analyze more correctly. I will show a very beautiful swing trade which is having huge profit.
So as per the above chart, we sold Apple stock in the first signal at $215 with the stop loss of 2% of the capital. Currently, suppose our capital on this trade was $10000. So we sold Apple Stock FUT at $215 for 10% profit. So this stock came down at $145 creating a bottom in this trade. But since we are following 10% rule we got out at $193. Making us a profit of $1000.
But that is not how we actually trade in swing trading. We Trail our profit or loss.
What is Trailing Stop Loss or Profit
So as per the above graph and the strategy we hit the profit when trade came at $193.5 in just 1 week. But Stock further degrade down and if we would have Trailed our profit at 10%. Means that once we reached 10% profit we’ll keep our stop loss as 10% profit. And in cases stock goes above 10% we are out of the trade without losing out anything.
So best strategy what I learned for Trailing Stop loss is Trail the Profit for every 1% of the Stock if the best idea which we followed in the above trade. So Once the trade breached our 1% trailing stop loss of profit which happened at $159.5 in the above graph we closed our trade.
That made us a profit of $55.5 which is around 25% of the entire capital. Isn’t it a great trade. Now let’s discuss another trade shown in the chart. Similarly, if we take the Buy setup in below image then we can get entry at around $165 and if we invest again $10000 on this trade then buy taking this Trailing Stop Loss idea we can get out of the Trade at $200.
Giving us a total percentage profit of around 23% on the entire investment or capital. Isn’t it great that you got a 23% return on just two trade? So following the above strategy I think you can easily make a good return on investment over a period of time. All you have to do is find some stocks which are about to cross the 50EMA line.
But there is also one trick if you can fine-tune your trading strategy of swing trading you can get a winning probability or percentage as more than 55-60%. Which can lead to a very huge profit on the capital. But again to get a higher winning rate we need to increase our risk factor a little.
Want to know more about swing trading strategies. Then comment below and let me know what more information you need. Also, I can provide free training on my strategy which is having a winning percentage of 60%. I am ready to share the tricks which earn me a lot in the stock market.
If you like me this post read my other post on guides here. Also follow us on Facebook, Twitter and Instagram. Also, subscribe to my YouTube channel where I will start the trading lessons very soon. Also, subscribe to our mailing list to get a free ebook on swing trading complete guide.