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Swing Trading Guide for Beginners

18 minutes
swing trading guide for beginners
Cristian Cochintu
Cristian Cochintu
20 March 2024
We look at swing trading strategies, methodology, indicators, and some tips that can prove useful for the beginner trader.

The appeal of swing trading is that it provides plenty of opportunities to trade; the dollar risk per trade is lower than with trend trading because of closer stops; it provides greater profit potential opportunity per trade than day trading; The downside of swing trading is that you must work hard all the time to manage trades; you are quite likely to miss major moves and frequent trading results in higher commission costs. 

A good argument can be made that beginning traders would be well-served to start with swing trading as it allows enough trading action to gain experience; losses can be limited with proper stop-loss techniques, and it provides a good perspective to learn about both the short-term and long-term movements of markets.

How to Start Swing Trading – Quick Guide

There are two ways to start swing trading, depending on your level of confidence and expertise. Your options are:

  • Open an account. You can open an account with quickly and easily
  • Practise trading on a demo account. Test your swing trading strategies in a risk-free environment with a CAPEX demo account

Alternatively, you can join CAPEX Academy to learn more about swing trading and other trading styles.


What is Swing Trading? 

Swing trading refers to the medium-term trading style that is used by traders who try to profit from price swings. These swings are made up of two parts—the body and the swing point. 

Swing Trading
Source: CAPEX WebTrader

It requires patience to hold your trades for several days at a time. Swing trading stands between two other popular trading styles: day trading and position trading. Swing traders identify a possible trend and then hold the trade(s) for a period, from a minimum of two days to several weeks.

It is ideal for those who can’t monitor their charts throughout the day but can dedicate a couple of hours to analyzing the market every night. Swing trading is best suited for those who have full-time jobs or school but have enough free time to stay up to date with what is going on in the global economy. 
Swing trading strategies employ fundamental or technical analysis in order to determine whether a particular asset might go up or down in price soon. Swing trading attempts to identify “swings” within a medium-term trend and enter only when there seems to be a high probability of winning. 
For example, in an uptrend, you aim to buy (go long) at “swing lows.” And conversely, sell (go short) at “swing highs” to take advantage of temporary countertrends. As a swing trader, your job is to time your entries in a way that catches the majority of each swing body. While catching a swing point can be incredibly lucrative, it isn’t necessary. 
In fact, attempting to catch the extreme tops and bottoms of swings can lead to an increase in losses. The best way to approach these trades is to stay patient and wait for a price action buy or sell signal. We’ll get into those various strategies shortly. For now, just know that the swing body is the most lucrative part of any market move. 
Because trades last much longer than one day, larger stop losses are required to weather volatility, and a trader must adapt that to their money management plan. You will most likely see trades go against you during the holding time since there can be many fluctuations in the price during the shorter time frames. It is important that you can remain calm during these times and trust in your technical analysis. 
Since trades usually have larger targets, spreads won’t have as much of an impact on your overall profits. As a result, trading assets with larger spreads and lower liquidity is acceptable. Still, you must pay attention to swap points. 

Types of Swing Trading 

How do you swing trade? There are several different trading strategies often used by swing traders. Here are the four most popular: reversal, retracement (or pullback), breakouts, and breakdowns.

Reversal Trading

Reversal trading relies on a change in price momentum. A reversal is a change in the trend direction of an asset’s price. For example, when an upward trend loses momentum, and the price starts to move downwards. A reversal can be positive or negative (or bullish or bearish). Reversals are sometimes hard to predict and to tell apart from short-term pullbacks. While a reversal denotes a change in trend, a pullback is a shorter-term “mini reversal” within an existing trend.

Retracement Trading

Retracement (or pullback) trading involves looking for a price to temporarily reverse within a larger trend. Price temporarily retraces to an earlier price point and then continues to move in the same direction later. Think of a retracement (or pullback) as a “minor counter-trend within the major trend”. If it’s a retracement, the price moving in against the primary trend should be temporary and relatively brief. Reversals always start as potential pullbacks. The challenge is to know whether it is only a pullback or an actual trend reversal.

Breakout Trading

Breakout trading is an approach where you take a position on the early side of an UPTREND and look for a price to "breakout”. You enter a position as soon as price breaks a key level of RESISTANCE.

Breakout Trading

Breakout trading is an approach where you take a position on the early side of an UPTREND and look for a price to "breakout”. You enter a position as soon as price breaks a key level of RESISTANCE.

Swing Trading Strategies 

We've summarised five swing trade strategies below that you can use to identify trading opportunities and manage your trades from start to finish. Apply these swing trading techniques to the currency pairs, stocks, indices, or cryptocurrencies you're most interested in to look for entry points.  

Fibonacci retracement 

The Fibonacci retracement pattern can be used to help traders identify support and resistance levels, and therefore reversal levels on the charts. Currency pairs often tend to retrace a certain percentage within a trend before reversing again and plotting horizontal lines at the classic Fibonacci ratios of 23.6%, 38.2% and 61.8% on a chart can reveal potential reversal levels. Traders often look at the 50% level as well, even though it does not fit the Fibonacci pattern, because currency pairs tend to reverse after retracing half of the previous move.  
A swing trader could enter a short-term sell position if the price in a downtrend retraces to and bounces off the 61.8% retracement level (acting as a resistance level), with the aim to exit the sell position for a profit when the price drops down to and bounces off the 23.6% Fibonacci line (acting as a support level). 

Support and resistance triggers 

Support and resistance levels represent the cornerstone of technical analysis, and you can build a reliable swing trading strategy around them.  
A support level indicates a price level or area on the chart below the current market price where buying is strong enough to overcome selling pressure. As a result, a decline in price is halted and the price turns back up again. A swing trader would look to enter a buy trade on the bounce off the support line, placing a stop loss below the support line. 
Resistance is the opposite of support. It represents a price level or area above the current market price where selling pressure may overcome buying pressure, causing the price to turn back down against an uptrend. In this case, a swing trader could enter a sell position on the bounce off the resistance level, placing a stop loss above the resistance line. A key thing to remember when it comes to incorporating support and resistance into your swing trading system is that when price breaches a support or resistance level, they switch roles – what was once support becomes resistance, and vice versa.  

Channel trading  

This swing trading strategy requires that you identify an instrument that's displaying a strong trend and is trading within a channel. If you have plotted a channel around a bearish trend on a chart, you would consider opening a sell position when the price bounces down off the top line of the channel. When using channels to swing-trade it's important to trade with the trend, so in this example where the price is in a downtrend, you would only look for sell positions – unless the price breaks out of the channel, moving higher indicating a reversal and the beginning of an uptrend.    

10- and 20-day Moving Averages 

Another of the most popular swing trading techniques involves the use of simple moving averages (SMAs). SMAs smooth out price data by calculating a constantly updating average price which can be taken over a range of specific time periods, or lengths. For example, a 10-day SMA adds up the daily closing prices for the last 10 days and divides them by 10 to calculate a new average each day. Each average is connected to the next to create a smooth line which helps to cut out the 'noise' on a chart. The length used (10 in this case) can be applied to any chart interval, from one minute to weekly. SMAs with short lengths react more quickly to price changes than those with longer timeframes. 

With the 10- and 20-day SMA swing trading system you apply two SMAs of these lengths to your chart. When the shorter SMA (10) crosses above the longer SMA (20) a buy signal is generated as this indicates that an uptrend is underway. When the shorter SMA crosses below the longer-term SMA, a sell signal is generated as this type of SMA crossover indicates a downtrend.  

MACD crossover  

The MACD crossover swing trading system provides a simple way to identify opportunities to swing trade. It's one of the most popular swing trading indicators used to determine trend direction and reversals. The MACD consists of two moving averages – the MACD line and signal line – and buy and sell signals are generated when these two lines cross. If the MACD line crosses above the signal line a bullish trend is indicated, and you would consider entering a buy trade. If the MACD line crosses below the signal line a bearish trend is likely, suggesting a sell trade. A swing trader would then wait for the two lines to cross again, creating a signal for a trade in the opposite direction, before they exit the trade.  

The MACD oscillates around a zero line and trade signals are also generated when the MACD crosses above the zero line (buy signal) or below it (sell signal). 

How to Swing Trade 

Step 1: Move to the Daily Time Frame
Step 2: Draw Key Support and Resistance Levels
Step 3: Evaluate Momentum
Step 4: Watch for Price Action Signals
Step 5: Identify Exit Points
Step 6: Calculate and Manage Risk


Step 1: Move to the Daily Time Frame

Spend most of your time on the daily charts. They offer a bigger picture of what’s happening with the price action and provide more reliable signals. However, not all daily time frames are created equal. For forex trading, use a specific type of chart that uses a New York close. Each 24-hour session closes at 5 pm EST, which is considered the forex market’s unofficial closing time. 
It is possible to use the 4-hour charts for swing trading, but usually the daily works best. As a rule, price action signals become more reliable as you move from the lower time frames to higher ones.

Step 2: Draw Key Support and Resistance Levels

Apart from Step 1, this is the most important piece of the entire process. Think of drawing key support and resistance levels as building the foundation for your house. It’s impossible to identify favorable swing trades without them. Before we show some examples using swing trades, let’s define the two types of levels.

Horizontal support and resistance

These are the most basic levels you want on your charts. They provide a great foundation for trading swings in the market and offer some of the best target areas. 

Swing Trading Support and Resistance
Source: CAPEX WebTrader

Trend lines

Not all technical traders use trend lines. We have no idea why someone would ignore them, especially a swing trader. 

Swing trading trendlines
Source: CAPEX WebTrader

They not only offer you a way to identify entries with the trend but they can also be used to spot reversals before they happen.

Step 3: Evaluate Momentum

At this point, you should be on the daily time frame and have all relevant support and resistance areas marked. Remember how we mentioned using swing points to evaluate momentum earlier in the post? 
Well, this is where those swing highs and lows come in handy. There are three types of market momentum or lack thereof. 

  • Uptrend: Higher highs and higher lows
  • Downtrend: Lower highs and lower lows
  • Range: Sideways movement 

A market that’s in an uptrend is carving higher highs and higher lows. 

Swing Trading uptrend
Source: CAPEX WebTrader

Notice how each swing point is higher than the last. You want to be a buyer during bullish momentum such as this. On the opposite end of the spectrum, we have a downtrend. In this case, the market is carving lower highs and lower lows. 

Swing Trading downtrend
Source: CAPEX WebTrader

You want to be a seller here. We’ll get into the various price action signals in the next step. Finally, is a ranging market. As the name implies, this occurs when a market moves sideways within a range. 

Swing Trading range
Source: CAPEX WebTrader

Although the chart above has no bullish or bearish momentum, it can still generate lucrative swing trades. In fact, ranges such as the one above can often produce some of the best trades. This is mostly due to the way that support and resistance levels stand out from the surrounding price action.

Step 4: Watch for Price Action Signals

Let’s review where you should be at this point. Steps 1 and 2 showed you how to identify key support and resistance levels using the daily time frame. Then in Step 3, you learned to evaluate the market’s momentum. This tells you whether the market is in an uptrend, a downtrend, or range-bound.  

If the market is in an uptrend, you want to begin watching for buy signals from key support. Our two favorite candlestick chart patterns are the pin bar and engulfing bar The goal is to use this pin bar signal to buy the market. By doing this, we can position as the market swings upward and continues the current rally. 

Swing trading pin bar
Source: CAPEX WebTrader

On the flip side, if the market is in a downtrend, you want to watch for sell signals from resistance. Again, we use a signal like a pin bar to identify the swing high, also called the swing point. You might not catch the entire swing, and that’s okay. The idea is to catch as much of it as possible but waiting for confirming price action is crucial. 

When looking for setups, be sure to scan your charts. Don’t make the mistake of searching for setups. Those two actions may sound similar but they are far from it. Scanning for setups is more of a qualitative process. In other words, you’re scanning for the very best setups and if you don’t find anything, that’s okay. Most traders feel like they need to find a setup each time they sit down in front of their computers. This is called searching for setups. 

So remember to scan for swing trade opportunities; never go searching for them. We’ve detailed the scanning steps to identify and execute low-risk, high-potential yield trades in our trading strategies course. 

Step 5: Identify Exit Points 

There are two rules when it comes to identifying exit points. 

  • The first rule is to define a profit target and a stop loss level. Many traders make the mistake of only identifying a target and forgetting about their stop loss. Don’t make that mistake. In order to calculate your risk as explained in the next step, you must have a stop loss level defined. 
  • The second rule is to identify both levels before risking capital. This is the only time you have a completely neutral bias. 

As soon as you have money at risk, that neutral stance goes out the window. It then becomes far too easy to place your exit points at levels that benefit your trade, rather than basing them on what the market is telling you. 

So what’s the best way to identify your exit points? Simple. Just use the support and resistance levels you identified in Step 2. 

Remember, those horizontal areas and trend lines are your foundation. Once they are on your chart, use them to your advantage. That involves watching for entries as well as determining exit points. 

Step 6: Calculate and Manage Risk

Once you have identified your exit points for the trade, it’s time for some risk management. Before we discuss how to identify stop loss levels and profit targets, we want to share two important concepts. 

The first is the risk-reward ratio. This is a way to calculate your risk using a single number. For instance, a setup with a 10-pip stop loss and a 300-pip target is 1:3. Similarly, if your risk is $100 and you stand to make $500, the risk-to-reward ratio is 1:5. 

The second concept we want to discuss is asymmetry. A favorable risk-to-reward ratio is one where the payoff is at least twice the potential loss. Written as a Risk-Reward Ratio, that would be 1:2 or greater. 

When calculating the risk of any trade, the first thing you want to do is determine where you should place the stop loss. For a pin bar, the best location is above or below the tail. The same goes for a bullish or bearish engulfing pattern. A stop-loss that is 10 to 20 pips above or below the candlestick being traded is a good place to start. 

Now that you have the stop loss placement identified, it’s time to determine the profit target. This is where those key levels come into play once more. Remember that when swing trading the goal is to catch the swings that occur between support and resistance levels. 

So if the market is trending higher and a bullish pin bar forms at support, ask yourself the following question. 

Where is the next key resistance level? 

The answer will not only tell you where to place your target but will also determine whether a favorable risk-to-reward ratio is possible.  

If it is, then you may have a valid buying opportunity in front of you. If not, you may want to stay on the sideline. 

Getting Started with

  • Swing trading is available through our derivative products, so read about CFDs to see which product is suitable for you.  
  • To start swing trading, you would have to open a live account to deposit funds and pick the asset that you want to trade on.
  • Alternatively, you can open a demo account to practise your swing trading strategies with $50,000 of virtual funds.


Swing trading platforms and apps

Our award-winning swing trading platform, CAPEX WebTrader, comes complete with technical and fundamental updates for the financial markets offered by Trading Central and TipRanks. Swing traders can make the most of our price projection tools, technical indicators, and drawing tools to display your data as clearly as possible. Price action strategies in swing trading are particularly simple to monitor with our customizable chart types and range of chart timeframes.  

You can also practice swing trading strategies using our mobile trading application for both iOS and Android devices. Our mobile apps come with customizable trading charts and adaptable layouts. The app can also be used on tablet devices for traders on the go.

Swing trading as a part-time job

For day traders, it’s often their full-time job, so they can focus solely on their trades and dedicate more time to improving their strategy, whereas swing traders can balance trading with their day job. This is because swing traders do not need to monitor price charts all day for tiny price movements; therefore there is more room to trade at home or on the go as a hobby.

Advantages and Disadvantages of Swing Trading

Many swing traders assess trades on a risk/reward basis. By analyzing the chart of an asset, they determine where they will enter, where they will place a stop-loss order, and then anticipate where they can get out with a profit. If they are risking $1 per share on a setup that could reasonably produce a $3 gain, that is a favorable risk/reward ratio. On the other hand, risking $1 only to make $0.75 isn’t quite as favorable.

Swing traders primarily use technical analysis, due to the short-term nature of the trades. That said, fundamental analysis can be used to enhance the analysis. For example, if a swing trader sees a bullish setup in a stock, they may want to verify that the fundamentals of the asset look favorable or are improving.

Swing traders will often look for opportunities on the daily charts and may watch one-hour or 15-minute charts to find the precise entry, stop-loss, and take-profit levels.

Benefits of swing trading

Drawbacks of swing trading

  • This style of trading is compatible with those who have full-time jobs and can’t dedicate hours each day to trading. This also means that swing traders will have another form of income should they make a loss.
  • You can set wider stop-loss orders, so this should help reduce the number of positions closing prematurely.
  • Day traders often need to be able to remain calm and stay focused on their screens for hours each day, which is less important for swing trading as the process happens at a slower pace.
  • Swing trading can be a more efficient use of capital by holding positions for higher returns, rather than opening new positions each day. However, choosing to do so will mean traders must take holding costs into account.
  • Traders must have knowledge of technical analysis in order to identify the entry and exit points. While this may come naturally for professional traders, those who are looking to start swing trading may need more practice analyzing price charts.
  • Due to the position being held overnight, or over several nights depending on the trader’s time horizon, you run the risk of gapping. Certain economic indicators can affect an asset's price overnight.
  • Holding the position for a longer period of time may result in larger profits, but it can also result in larger losses, due to the use of leverage.
  • Swing trading requires patience and could still be a high-stress environment if a trade begins to move in an unfavorable direction.

Summary: can you make a living swing trading?

Swing trading is an alternative strategy for those who favor short-term trading but can’t dedicate hours to trading every day. While it requires a comprehensive understanding of technical analysis, it can result in more consistent returns in the long run, relative to day trading. As with any form of trading, there will be risks involved. Swing traders, particularly those just starting out, should ensure they have a solid understanding of the technical indicators, as well as the market fundamentals, that are informing their trade decisions. A swing trader should also strongly consider having a stop-loss in place, should there be breaking news that affects the market direction they’re favoring.

Free Resources

Before you start swing trading, you should consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of free trading courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader or make more-informed investment decisions.  

Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.

FAQs about Swing Trading






Cristian Cochintu
Cristian Cochintu

Cristian Cochintu writes about trading and investing for Cristian has more than 15 years of brokerage, freelance, and in-house experience writing for financial institutions and coaching financial writers.