What Is Swing Trading?
Swing trading captures the "swing" in price—multi-day moves driven by technical patterns and short-term momentum. Typical holding period: 3-10 days. Target: 5-15% per trade.
It's the Goldilocks strategy. Not too fast (day trading), not too slow (investing). You ride the wave long enough to catch meaningful profits, but exit before the next reversal.
Swing traders don't care about quarterly earnings or 10-year visions. They care about one thing: what the chart says will happen in the next 5 days.
The Core Swing Trading Edge
Markets move in swings: impulse + correction + impulse. Swing traders enter at the end of corrections and ride the next impulse. Simple, repeatable, profitable.
The Setup:
- Stock in uptrend pulls back to support (50-day MA, trendline, horizontal support)
- RSI drops to 35-45 (mildly oversold, not panic)
- Bullish reversal candle forms (hammer, engulfing, morning star)
- Enter next day. Target previous high. Hold 5-10 days.
Best Swing Trading Setups
These six patterns have been printing money for decades. Master them, and you'll never run out of trade ideas:
Setup: Strong uptrend. Stock pulls back to 50-day moving average. Bounces with bullish candle.
Entry: Buy close above 50-day MA or next open.
Target: Previous high or +8-12%.
Stop: Below 50-day MA (3-5%).
Win rate: 65-70%
Setup: Sharp rally (flagpole) → tight consolidation (flag) → breakout continuation.
Entry: Breakout above flag resistance on volume.
Target: Flagpole height added to breakout.
Stop: Below flag low.
Win rate: 70-75%
Setup: Stock respects ascending trendline. Pullback to trendline. Rejection with volume.
Entry: Bullish candle forms at trendline.
Target: Recent swing high or +10%.
Stop: Close below trendline.
Win rate: 60-65%
Setup: U-shaped consolidation (cup) → tight flag (handle) → explosive breakout.
Entry: Breakout above handle resistance.
Target: Cup depth added to breakout.
Stop: Below handle low.
Win rate: 70%+
Setup: Stock gaps up on news. Pulls back to fill gap. Support at gap level. Reverses higher.
Entry: Bullish reversal at gap support.
Target: Gap high or beyond.
Stop: Close below gap.
Win rate: 55-60%
Setup: Stock tests same support twice. Second test holds. Breaks above resistance (neckline).
Entry: Breakout above neckline on volume.
Target: Neckline to low distance, added upward.
Stop: Below second bottom.
Win rate: 65-70%
Entry Timing: The 3-Step Confirmation Process
Amateur swing traders enter too early and get stopped out. Pros wait for confirmation. Here's the process:
Step 1: Identify the Pattern
Spot the setup on daily chart. Mark support/resistance, key moving averages, trendlines.
Step 2: Wait for Reversal Signal
Don't enter at support—wait for price to prove it's reversing. Look for:
- Bullish engulfing candle
- Hammer or morning star at support
- Higher low + higher high (trend reversal)
- Volume expansion on up day
Step 3: Confirm on Shorter Timeframe
Daily chart shows setup. 4-hour or 1-hour chart confirms momentum shift. When both align, enter.
Stop Loss and Position Sizing
Swing trades need room to breathe. Too tight = stopped out on noise. Too wide = excessive risk. Here's the balance:
Stop Placement Rules
- Support-based: Place stop 1-2% below support level (MA, trendline, horizontal)
- ATR-based: Stop = Entry - (1.5 × ATR). Accounts for volatility.
- Pattern-based: Below pattern's invalidation point (e.g., below cup's low)
- Max risk: 5-7% from entry (absolute limit)
Position Sizing Formula:
Risk amount ($) ÷ Stop distance (%) = Position size
Example: Risk $500 on 5% stop → $500 / 0.05 = $10,000 position
Profit Targets and Exit Strategy
This is where most swing traders fail. They exit too early (4% profit) or too late (give back gains). Here's the professional framework:
The 3-Target Exit System
Target 1 (50% of position): +6-8%
Quick profit. Locks in gains. Reduces risk to zero if hit.
Target 2 (30% of position): +10-12%
Previous swing high or measured move target. This is the "expected" profit.
Target 3 (20% of position): Let it run
Trail stop (8% below current price). Catch extended moves (15-25%+). This is where you hit home runs.
Why scale out? You lock in profits while staying exposed to bigger moves. Best of both worlds.
Time Stops: The Secret Weapon
Swing trades should resolve quickly—3-7 days typically. If a trade goes nowhere for 10 days, something's wrong. Exit and deploy capital elsewhere.
Time-Based Exit Rules
- Day 5-7: If still at entry, assess. Is momentum building or fading?
- Day 10: If no progress toward target, exit. Opportunity cost is real.
- Day 15: Absolute limit (unless trailing stop is in profit zone)
Dead money kills returns. Be ruthless about cutting stagnant positions.
Real Example: Textbook Swing Trade
Case Study: Pullback to 50-Day MA
Stock: Quality mid-cap in strong sector
Trend: Up 35% over 3 months, respecting 50-day MA
Setup:
- Day 1-3: Pulls back from $78 to $72 (8% decline)
- Touches 50-day MA at $71.50
- RSI drops to 42 (mildly oversold)
- Day 4: Hammer candle forms at MA on elevated volume
- Day 5: Bullish engulfing, closes at $73
Entry: $73.50 (next open after confirmation)
Stop: $70 (below 50-day MA and pattern low, 4.8% risk)
Targets: T1 = $78 (+6%), T2 = $81 (+10%), T3 = trail
Evolution:
- Day 6-7: Grinds to $75 (+2%)
- Day 8: Breaks to $77.50 (+5.4%)
- Day 9: Hits T1 at $78 → Exit 50% for +6%
- Move stop to breakeven on remaining 50%
- Day 11: Momentum continues to $81 (+10%) → Exit 30% at T2
- Day 13-15: Spike to $84 (+14%) on sector news
- Trail stop triggers at $82 → Final 20% exits at +11.5%
Results:
50% @ +6% = +3%
30% @ +10% = +3%
20% @ +11.5% = +2.3%
Total: +8.3% in 10 days. Risk: 4.8%. Reward:Risk = 1.7:1.
Do's
- Trade with the trend (pullbacks in uptrends, not reversals)
- Wait for confirmation (bullish candle, volume)
- Use support levels (MA, trendline, horizontal)
- Scale out (lock profits, stay exposed)
- Set stops immediately (non-negotiable)
- Review trades (journal every setup)
Don'ts
- Don't catch falling knives (wait for reversal proof)
- Don't trade against trend (counter-trend = low win rate)
- Don't ignore volume (no volume = no conviction)
- Don't hold losers (stop = exit, no exceptions)
- Don't overtrade (quality > quantity)
- Don't swing through earnings (binary risk destroys technicals)
Advanced Swing Trading: Multi-Timeframe Analysis
The best swing traders analyze multiple timeframes to confirm setups:
The 3-Timeframe System
- Weekly chart: Identifies major trend and key support/resistance
- Daily chart: Shows swing trading setup and entry pattern
- 4-hour chart: Confirms momentum shift and precise entry timing
Rule: All three timeframes must align. Weekly uptrend + Daily pullback + 4H reversal = high-probability trade.
Risk Management and Portfolio Approach
Professional Risk Framework
- Risk per trade: 1-2% of account
- Max concurrent positions: 4-6 swings
- Diversify sectors: Don't hold 4 tech swings
- Position sizing: Based on stop distance (closer stop = larger size)
- Max account risk: 6-8% (if all positions stopped out)
- Win rate target: 60%+ (losers small, winners bigger)
When Swing Trading Works Best
Swing trading thrives in specific market conditions:
- Trending markets: Clear uptrend or downtrend with healthy pullbacks
- Moderate volatility: VIX 15-30 (not too choppy, not too calm)
- Liquid stocks: $500M+ market cap, 1M+ daily volume
- Sector rotation: When hot sectors are emerging
- Earnings season lulls: Trade between earnings announcements
Avoid swing trading when:
- Market is range-bound and choppy (use mean reversion instead)
- VIX > 35 (too much intraday noise)
- Around major news events (Fed, geopolitical shocks)
- Illiquid stocks (spreads kill profits)
The BroBillionaire Swing Trading Playbook
Your Weekly Routine
Weekend:
- Scan for stocks in uptrends near key support (50/200-day MA)
- Mark charts with entry zones, stops, targets
- Build watchlist of 10-15 candidates
Daily (Morning):
- Check watchlist for reversal signals (bullish candles at support)
- Review existing positions (move stops, take profits if targets hit)
- Set alerts for breakout levels
Daily (After Close):
- Evaluate new setups from alerts/scans
- Plan entries for tomorrow (limit orders, price alerts)
- Journal any trades taken (setup, entry, thesis)
Time commitment: 30-45 minutes per day. That's the beauty of swing trading.
Final Thoughts: The Art of Patience
Swing trading rewards patience and punishes impulsiveness. The best setups are obvious in hindsight—but you need discipline to wait for them.
Don't force trades. Don't chase. Don't hope. Wait for the chart to tell you what it's doing. When all your criteria align, pounce. When they don't, sit on your hands.
Because in swing trading, the money isn't made in the action—it's made in the waiting. And when the perfect setup finally materializes, you're ready.
Your job: Be patient. Be disciplined. Be ready when opportunity knocks.