How to Swing Trade for maximum gains

How to Swing Trade for maximum gains

In this post, we’re going to take you through one of the least risk-prone trading techniques; Swing Trading, which, if done correctly can be incredibly profitable and has a very high reward-to 4-risk ratio.

What is Swing Trading?

Swing trading is a type of trade, whereby, the trader keeps ahold of their stock for a relatively short period of time, in order to benefit from an upward swing in value. This is generally less than a month and is often only a matter of days. This contrasts with ‘scalping’ and ‘day trading’, where the trader only holds their stock for less than a day and tends to make a comparably smaller gain upon closing their position.

The technique used for Swing Trading

Wait for the drop

The drop could be recognised off a trend in the stock chart, a random sell off or a market correction.

Let the stock stabilise

This is where experience really plays a role, as the time of stabilisation can differ hugely, depending on how much of a correction the stock has seen. For example, if it’s a trend that’s been recognised over the space of the week, whereby, it bounces between the Support and Resistance lines, then the ‘stabilisation’ can be as little as a few hours of the stock slowly gaining or being completely stable.

However, if this was a longer swing, where the stock has dropped 10+% over the space of a week or so, then you may have to wait a good few days or even up to a week, to see if this is the rock bottom.

At this point, we’d be looking to buy this stock

You now have to really gauge how much growth you expect to see on this stock. If there had been no significant news prior to the drop, then we would often place the ‘take profit’ at around the peak of the stock price; pre dip.

What to do next

Watch the stock carefully for any further dips and if you’re wrong with the stock, get out quickly – We usually set a stop loss about 3-5% lower than the buy in point here. If you’re vigilant, you can continue to watch the stock and run through steps 1-4 once again.

The key behaviors you need to know, in order to become a successful swing trader

Research the stock thoroughly

Find out why it has dropped – Politics can play a huge role here, so company news may not be enough. Are there any other causes for the price move? a market corrections? you get the idea… There are a lot of factors at play and missing just one of them, could leave you with a stock that’s dropping like a stone.

Waiting for the drop is very strategic

A stock may be rising which, let’s be honest, will be a very large temptation to you, and while it is a temptation and may not actually be a bad investment, it’s also important to know when a stock may be overpriced, or is due a market correction.

Don’t try and catch a falling knife

Support lines usually sit at round numbers and are followed by a very sharp bounce. It’s important to wait this one out, as it will come back down again.

Wait for the selling force to weaken and the buying force to strengthen

leveling the playing field – This involves learning the market a little and analysing the trading behavior attached to a certain stock.


If you’re wrong about the investment and it carries on dropping, get out fast! In time you may recover your investment, but the principle of swing trading is relatively quick gains; so consider cutting your losses and closing the position if you see a better opportunity appear.

You should now have the basics of Swing Trading laid out – the rest lays in your hand. If you’d like to try and apply your newly acquired knowledge, then we’ll be sharing our trades so you can see how these principles are working out for us!

Let us know if you have any other tips or ideas which we’ve missed on our list in the comments below – have you had any luck by following these ideas or have you found stock market success another way?

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  1. […] on from last week’s introductory article on swing trading (which can be found here in case you missed it!), today’s article centers on a rather grey area of trading; the practice […]

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