Swing trading strategy means the identification of stocks that have the potential to showcase short-term momentum for active trading. The short tenure swing is typically between two and 30 days. In the period of high volatility, there is a higher possibility of getting regular swings in the market, hence, better opportunities to trade.

stock selection criteria for swing trading

When searching for swing trading stocks, don’t look at debt levels or price-earnings ratios. Those stats might matter for a company’s long-term prospects, but swing traders care about where a stock will be a couple of days, not a couple of years or decades. A stock that moves upward and downward in sharp “swings” is not a stock most long-term traders find desirable. For short-term traders, swings produce opportunities for trading over a period of days rather than months or years.

The reactivated functionality where investors can download historical data makes this share screener attractive again. To stick with the cup and handle example, you’ll want to set the price target before it gets to the “handle” of the cup and handle. After recovering from the selloff (completing the “cup”), a cup and handle pattern experiences another drawback before returning to its otherwise upward trend.

Which Stock Is Best For Swing Trading?

The following chart as of the close of Friday, July 9, 2021, shows the current relative strength of these four sectors. SwingTrackr is for informational purposes only as SwingTrackr is world currencies not registered as a securities broker-dealer or an investment adviser. 5) Select stocks from you pre-screened list, and from the market segment that is currentely performing the best.

stock selection criteria for swing trading

If a stock is of interest, pull up a big chart of it , draw your own lines, and look for potential trade levels . At the time of this scan, you can see that LULU is on the list. It is near the top of the channel, but it was also on the list when it was near the bottom of the channel, providing our trade example for this article. I love this trend channel strategy because it is one of the easiest ones to scan for. Earnings announcements can cause large gaps in the stock price, meaning you could end losing much more than you expected if the price gaps below your stop loss. A stock can gap 10%, 20%, or even 50% or more on an earnings announcement….even in seemingly stable companies.

The Daily Routine Of A Swing Trader

It is a solid strategy and is covered in more detail in my Complete Method Stock Swing Trading Course. The reward potential in swing trading is plentiful, but so are the risks. ETFs can be a way to potentially mitigate risk and play a hot sector. I don’t trade ETFs, but it’s good to know what’s out there.

stock selection criteria for swing trading

You can find weak, beaten-down names that have the potential to come back. Swing trading can be potentially profitable if you have a good strategy and you manage risk well. Before you worry about making money, make sure you have a solid strategy that works for you.

Track & Manage Your Trades Track

Link to your brokerage account to use these stock research app. Like #4 on this list, this swing trade alerts service also comes from Motley swing trade scanner Fool. The list of best swing trade alert services below runs the gamut from timeframe, cost, types of alerts and subscription model.

  • If you are happy with a 20% gain over a month or more, 5% to 10% gains every week or two can add up to significant profits.
  • For example, when the indexes are shooting higher, there may not be as many pullbacks.
  • There are a variety of methodologies to capitalize on market swings.
  • Schwab Equity Ratings are assigned to approximately 3,000 of the largest U.S. headquartered stocks using a scale of A, B, C, D and F.

This is what our Swing Trader education package and daily stock market newsletters are for. It’s a community of traders who share their trades openly to help each other learn and improve. Exchange-traded funds can be a way to potentially play an entire sector instead of picking individual stocks when a sector starts to heat up. If you’ve gained anything from this post so far, hopefully, it’s the fact that to swing trade well, you gotta have a plan and stick to it. Don’t try to be a hero — if things don’t work out for you, in any trade, cut those losses. In the stock market, volatility generally implies greater risk, which means higher odds of a loss.

How To Find The Strongest And Weakest Stocks In A Sector

The idea is that the stock needs to tick 12 of the 13 boxes or you can’t enter the trade. But there are real patterns in charts that can be traded for profit. Sounds a bit funny but I prefer to trade stocks that have large price candles. Some stocks enter phases of low volatility and drift away.

They refer to the way that a given stock is trending and can be used to suggest the best points for buying or selling. Swing traders track these levels with charts that show price movement in daily increments. While these risks are significant, it’s important to remember that all stock traders face risks. Day traders and passive investors face dangers, as well.

Whats A Swing Trading Strategy?

Where Trade Ideas excels is not only giving you the data and ideas you haven’t seen elsewhere, but also how to manage your money. The rules-based virtual trading room on every chart plays for both long-term investors as well as active traders. The powerful service allows you to access real-time streaming trading ideas on simultaneous charts to learn how to trade into risk-reward balanced trades.

You should carefully consider if engaging in such activity is suitable for your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities. We teach you the entire approach to swing trading with options and how to choose the best trading Eurobond strategy in each and every market condition. My goal is to teach you how to forge a sustainable, long-term career as a day trader. My team and I strive to educate you on many different trading styles so that you can diversify and remain nimble in the market. This can help you think about everything that goes into a trade.

Entering A Trade

Also, institutions use their proprietary artificial intelligence based algorithms, and I use this stock scanner for over ten years now. Trade Ideas has just everything that a day trader could need. A fast scanner, excellent support, education, backtesting functionalities, a free trading room, automated trading and much more for a reasonable price.

3) This screen will provide you with a list of stocks that have something going on, as evidenced by both the gap up and confirmed by an increase in relative volume. This is a very fertile list of potential stocks that provide excellent candidates to further develop and research. 2) Look for stocks performing well when markets are down.

Author: Anzél Killian