Swing Trading Patterns
In this article, we’ll discuss:
- Swing Trading Patterns
- What are Swing Trading Patterns
- Popular Swing Trading Patterns
- Learning How to Use Swing Trading Patterns
- Finding Stocks with Swing Trading Patterns
- Sectors with the Most Volatility
- Joining The Swing Trading Club
Swing trading is a strategy that involves holding a stock for some time, usually a few days to a few weeks, in an attempt to profit from price changes or 'swings.' A swing trader typically uses technical analysis to look for stocks with short-term price momentum.
Technical analysis involves looking at the price chart of a stock and analyzing it. For example, you could look at the price chart for Apple stock over the last 6 months and see how the price has changed.
When looking at that chart, particularly the recent history of it, you can look for patterns that reflect swing trading opportunities. Sometimes a pattern might reflect a bullish condition (where the odds might favor the price going up). Sometimes a pattern reflects the opposite.
There are a number of different chart patterns used to identify potential swing trading opportunities. Understanding these patterns is one of the foundational components of learning to swing trade.
Popular Swing Trading Patterns
Some of the most popular swing trading patterns include:
Wedge: This swing trading pattern is created when there is price consolidation that forms what looks like a triangle. The price keeps “wedging” into a smaller and smaller corridor. If the price breaks out of the corridor to one direction or another, that can be considered a swing trade entry signal.
Head and shoulders: This swing trading pattern is created when the price of a stock forms a peak (the head), followed by a lower peak (the left shoulder), and then another lower peak (the right shoulder). The right shoulder is typically lower than the left, which creates a "head and shoulders" shape. This pattern is considered to be a bearish signal, as it indicates that the price is likely to continue to fall. In our discord chat room, we use a bot that scans for head and shoulders setups in the stock market. It’s the same bot that is used at Trading Chat Room.
Inverse head and shoulders: This swing trading pattern is the opposite of the head and shoulders pattern and is considered to be a bullish signal. It is created when the price of a security forms a trough (the head), followed by a higher trough (the left shoulder), and then another higher trough (the right shoulder). The right shoulder is typically higher than the left, which creates an "inverse head and shoulders" shape.
Double top: This swing trading pattern is created when the price of a security reaches a peak, pulls back, and then reaches that same peak again. This pattern is considered to be a bearish signal, as it indicates that the price is likely to continue to fall after the second peak.
Double bottom: This swing trading pattern is created when the price of a security reaches a trough, pulls back, and then reaches that same trough again. This pattern is considered to be a bullish signal, as it indicates that the price is likely to continue to rise after the second trough.
Triple top: This swing trading pattern is created when the price of a security reaches a peak, pulls back, and then reaches that same peak two more times. This pattern is considered to be a bearish signal, as it indicates that the price is likely to continue to fall after the third peak.
Triple bottom: This swing trading pattern is created when the price of a security reaches a trough, pulls back, and then reaches that same trough two more times. This pattern is considered a bullish signal, as it indicates that the price will likely continue to rise after the third trough.
These are just a handful of the chart patterns that can be used for swing trading. Seasoned traders often use one or more of these indicators as part of their trading strategies.
Learning How to Use Swing Trading Patterns
We teach each of these swing trading patterns in our swing trading course. For each pattern, we explain when exactly you would make an entry according to the rules of the pattern, as well as when you could make an exit.
That makes it very easy to manage your trades. Using patterns in that way makes swing trading more formulaic. Rather than shooting from the hip with your trades, you simply follow the rules of the pattern and manage your trades that way. Those are the precise rules we teach in our course.
The best way to find out which patterns work best for you is to experiment with different combinations and see what works best for your trading style.
Once you have identified a swing trading chart pattern you like, you can use that information to decide when to buy or sell the stock. Each pattern typically has a specific pre-determine point when it suggests buying the stock.
It is important to remember that no single chart pattern is guaranteed to be successful and that you should always use other information (such as support and resistance levels, trend lines, and moving averages) to confirm your decision.
Swing trading can be a great way to make money in the stock market, but it is not without risk. Before you start swing trading, make sure you understand the risks involved and have the plan to manage them.
Finding Stocks with Swing Trading Patterns
Learning about swing trading patterns is the first step to making money swing trading.
The next step is finding stocks or options that meet the criteria of those swing trading chart patterns.
And that’s one of the benefits of our swing trading discord chat room. That’s where all our members get together to talk about trades.
You’ll find out in real time when someone in the group spots a stock where the swing trade pattern is flashing a buy signal. Getting those sorts of trade alerts can have a big impact on your ability to make profit in the stock market.
Our service costs $19 per month and you get access to everything we offer.
Aside from that, you can also look through your trading platform at the charts in there. You can literally take your favorite stocks and just flip through them one at a time, looking for any swing trading pattern you like.
Some trading platforms have screeners or scanners that look for particular chart patterns. For example, if you’re looking for a stock that’s been in a consolidation pattern, you could try looking for stocks that have a very narrow price range over the last several days. Or a swing trader might look for stocks that have recently experienced a breakout from a consolidation pattern.
Once a swing trader has found a stock that they believe is ripe for a swing trade, they will need to determine an appropriate entry point and position size. These are things that are helpful to determine up front.
Once in a trade, swing traders will typically set a stop-loss order to protect their position. They will also often set a target price, at which point they will take profits.
Swing trading can be a profitable strategy for traders who are able to find stocks that are suitable for this type of trading. However, it is important to remember that swing trading is a higher-risk strategy than buy-and-hold investing, and it is important to use stop-loss orders and take profits when they are available.
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