Swing Trading Time Frame Strategies to Put You on Top

Swing trading is a proven way to win at investing in the stock market. It’s never a slam dunk, however. Swing traders take their business seriously and do the utmost to get their trades and investments right. Anything less than a focused, winning strategy will result in an undesirable outcome. Here’s a look at this challenging arena, with a focus on the best time frame for swing trading.

Swing Trading – What it is and How it Works

Swing trading is a strategy and technique for investing in the stock market or any other type of financial instrument. The aim is to take advantage of short-term or medium-term gains on a stock, over a period of days or weeks. It goes against the traditional “keep and hold” strategy which most financial advisors advise their clients – that is, to be patient, hold on to your investments, and wait for positive returns over the long term.  In the world of swing trading, it requires a different kind of patience and mindset.  

Swing traders analyze their holdings almost continuously, for anticipated upward moves to capitalize on, and sell or buy at the appropriate moment. The time period for holding on to a buyer could be some days, if the indicators are there, to a few weeks.  

Swing trading is similar in some ways to the technique of day trading, but it involves longer time frames. Day traders attempt to take advantage of shifts in the markets in terms of minutes or hours, to make profitable moves. Swing trading by contrast offers a longer spectrum of time and different types of indicators.

Swing Trading Strategies

• Technical Analysis as Used in Swing Trading
• Fundamental Analysis as Used in Swing Trading

Swing traders employ a number of different strategies, or combinations of them, to identify the optimum time to make a trade – buy or sell.  The trader’s move can last 2-3 days, or a number of weeks, before making the next one on a particular stock.  Two of the most common strategies rely upon are technical analysis and fundamental analysis.

Technical Analysis as Used in Swing Trading

The technical analysis primarily utilizes statistical trends, based upon the activity – buying and selling – around a particular instrument such as a stock.  It is the most common form of analysis swing traders use to fit with what they consider the best time frame for swing trading.  Traders analyze charts and activity, mostly from the recent past, try and determine its future price.  Price and volume are the primary indicators used in technical analysis.

Fundamental Analysis as Used in Swing Trading

This methodology contrasts technical analysis, the primary determinants of whether to buy or sell are the economic and financial factors around a particular stock.  This method places far less emphasis on trends and past trading history.  The end-in-mind is to ascertain whether the stock may be undervalued or overvalued and buy or sell based on those conclusions. 

Best Time Frame for Swing Trading

The simple answer: there probably isn’t a “best time” for swing trading.  Regardless of the strategy or discipline you plan to adopt for your analysis and decision making, it is next to impossible to make the unpredictable world of stocks and securities fit into one designated time frame, such as daily, or weekly, or some time frame in between.  The most common sources for analysis are daily charts, although four-hour charts are also used.

It’s important to note the difference between swing trading and day trading. The latter is based on a strategy of making potentially several or even many trades of a single stock in one trading day; this is to try to take advantage of minor movements in the price one way or the other.  Swing trading allows much more flexibility and time for analysis between trades.

Along with daily charts, swing traders typically analyze multi-day chart patterns, so the best time for swing trading is substantially more than one day.  What they are looking for are patterns that are predictable, which become their indicator to make a trade on a particular security.  

Indicators for Swing Trading

Some common indicators for swing trading include:

Trendlines – straight lines under highs and lows which indicate the general direction of a stock price.

Fibonacci levels – these ratios, based on the Fibonacci number string, track retracement levels.  Traders use them when looking at high and low prices to determine whether or not a price of a stock is going to stall or begin to reverse.  

Pivot Points – the price level of a stock that could be an indicator of movement.

These just scratch the surface. There are many indicators traders use as analytical aids to track the movement of stock prices.

Best Moving Average for Swing Trading

Among the most common moving average periods for swing trading are 20/21, 50, 100, and 200/250.  For swing traders, a 50-period average is a good choice and probably the most frequently used, as it sits in the middle of the shorter period 20/21 and the longer 100.

Swing Trading – Best Time Frame, Analysis, Indicators, Moving Averages

Swing trading strategies can work, but it takes a detailed and thorough understanding of all of the above. It takes a mindset and focuses that differs from the more frantic day trading approach; at the same time, it is a much more active discipline than the tried-and-true “buy and hold” approach. The goalposts for success are lower for swing traders.  Because of the accelerated pace of trades, swing traders can take a lower profit margin on each of their trades but earn big cumulatively. It’s very important to note that along with the gains will come periodic losses – it’s all part of the game. Experience has also shown that swing trading takes time to become profitable. There is a learning curve, and at the outset, the losses may be more common than the gains. Happy swing trading!