Swing Trading
Capture a single leg of a larger move. Combines elements of trend and mean reversion — buy pullbacks in uptrends, sell rallies in downtrends.
Thesis
Capture a single leg of a larger move — the impulse from one swing low to the next swing high (or vice versa) within an established trend. Swing trading combines elements of trend following and mean reversion: buy pullbacks in uptrends, sell rallies in downtrends. The unit of analysis is the daily chart.
Entry Rules
- Confirm the larger trend on the daily or weekly timeframe.
- Wait for a counter-trend pullback, typically a 38–61% retracement of the prior leg.
- Enter on a reversal signal at known support or resistance: pin bar, engulfing candle, oversold RSI within an uptrend.
Exit Rules
- Take partial profits at the prior swing high (longs) or swing low (shorts).
- Trail the remainder with a moving average to capture trend continuation.
- Hard stop just beyond the swing point you bought from.
When It Works
- Trending markets with regular, measurable pullbacks.
- Stocks with established earnings cycles and clean technical structure.
- Forex pairs that respect technical levels.
When It Fails
- Sideways markets where pullbacks don’t resolve into continuation.
- Strong trends with unusually shallow pullbacks — you wait for the entry that never arrives.
- News-driven gaps that skip past your planned levels.
Common Mistakes
- Holding through earnings or major events without a defined risk plan.
- Catching falling knives — confusing the start of a downtrend with a pullback within an uptrend.
- Position sizing as if it were a day trade. Overnight risk is real and compounding.
- Lacking patience and entering before the pullback completes.