How to Swing Trade for Beginners?
How to Swing Trade for Beginners Guide
What is swing trading for beginners?
Swing trading involves holding a stock for more than one day to several weeks to obtain short to medium-term gains. This is obtained by choosing highly volatile stocks with lots of price movement, or identifying when stock has dropped by a chunk percentage, buying, and taking the profits when the stock recovers by increasing back in price.
Swing traders generally use technical analysis such as the RSI model and back that up by fundamental analysis, and, using risk to reward basis, for example, an 1 to 3 risk/reward is very popular which mean you would set a stop loss at $10 and take profit of $30.
Swing trading requires time, but not as much as day trading which a lot of traders do full time, but more of a part-time job. While you can swing trade any assets, like many others, I prefer to swing trade mega and large capital stocks, another favorite of mine is to swing trade IPO stocks.
How to Swing Trade for beginners?
My swing trading strategy using the RSI model and Fundamentals.
To find stocks to swing trade we go finviz.com to search for mega or large capital stocks as we want to invest in the largest and well know companies that are below the RSI line of 30, with is an indicator that they are trading below their true value.
Then we first research the best-known stock that has the lowest RSI value. Go to stockcharts.com and enter the stock ticker name to reveal where the stock is on the RSI model, below the 30 line we buy, and above the 70 line we sell.
Next, we enter into Google “ticker stock price” to check the price drop to make sure there was at least a 10% drop in price in the past month.
Then we search Google for “ticker stock price prediction” to check the stock market analysts’ price prediction and rating, I usually use money.cnn.com but tipranks.com is also a great choice.
Now we look for the current stock price to be below, or around the lowest stock price prediction for the next 12 months. Also, we want the majority of analysts’ ratings to be a buy, so the overall consensus rating is to be a buy position.
If the stock has a buy rating and the price is near the lowest price prediction we only have one more step before buying which is to check why the stock price is down by researching Google news, if the bad news is temporary we would buy the stock. We do this by entering into Google “ticker stock price” and hitting the news tab, or by searching Google for “why is ticker stock price down”.
Now that we have bought the stock you need to decide which risk/reward strategy you will use, like 1 to 3 could be a 3% stop loss and a take profit of 9%, this can be done manually by watching the stock price or automatically by setting a stop loss or take profit. Overall, this is where time, experience, and practice come into play.
In this video tutorial, I will cover stock market news and business trends and which websites I use to complete stock market research. Also, I complete my swing trading strategy live with a recap of my swing trading strategy.
In this Swing Trading tutorial, I will continue to show you my swing trading strategy by trading live and selling a stock when it has realized my preferred profit and then researching and adding another stock to my portfolio.
In this Swing Trading tutorial, I share tips and tricks of my swing trading strategy, the importance of having a stops loss, and how I watch the market if I don’t have a stop loss, all together with more live swing trading on eToro.
Common Swing Trading Questions for Beginners
How many stocks should I have in my portfolio?
For your swing trading portfolio, I would recommend holding at least 5 to 10 stocks in different business sectors for example Technology, Finance, Healthcare, Consumer goods, basic material, etc.
Once you sell a stock for the realize profit replace it with another stock using the same strategy. When you are starting out you don’t have to buy all the stocks in one day, better over a longer period of time when suitable stocks arise, Also, be patient when replacing stocks that you sell.
What is the Relative Strength Index? (RSI)
RSI is a momentum indicator used to identify when a stock is oversold meaning many investors have sold the stocks meaning less demand which means a lower price, under the RSI 30 line over the last 14 days is the indicator I use when finding stocks to buy to swing trade.
Oppositely the RSI is used to find stocks that are overbought meaning many investors have bought the stock meaning more demand and a higher price, I use over the RSI 70 line over 14 days as an indicator of when to sell a stock or to find stocks to short, shorting is trading that the stock will go down in price and taking profits when the price drops.
What is Fundamental analysis?
Fundamental analysis is a method of trading by studying stocks news, financials, and other factors that may affect the value of a stock such as new product releases, consumer trends to determine the real value of a stock and its potential for future gains.
What is Technical analysis?
Technical analysis is used to identify trading opportunities by using stock charts and tools to examine price trends, the volume of trades and patterns, and technical indicators such as the RSI model. Technical analysis is used to study past trading activity and trends to determine future price movements.
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