Swing trading in stocks: How I map out my strategy

How can you master swing trading stocks without watching the stock market all day? In this article, trading expert Michael Stark shares his different swing trading strategies, insights on swing trading in stocks, and key tools to trade smarter.

Swing trading is a relatively longer-term approach to trading CFDs than day trading and scalping. One common definition of a swing trade is a position held for at least a couple of days but usually less than a fortnight. Swing trading differs from day trading in that it works over longer periods while it differs from position trading in that swing trades are usually held for less time, but there is some overlap between swing and position trading.

The main idea behind swing trading is that the primary movement for most instruments, including stocks, normally lasts for more than one day. From this, it follows that a trader holding longer can have a higher potential profit in various situations without needing to pay more spreads or commissions to enter new positions every day.

This article outlines my approaches to swing trading stocks as CFDs: what I’ve found works for me and what doesn’t, plus some of the key advantages and disadvantages of this approach. I want to stress that swing trading CFDs on stocks won’t suit everybody. You always need to do your research and test any swing trading strategy before using it for live trading. However, I hope this article will give you a new perspective on an approach that is relatively uncommon among CFD traders but can be successful with discipline, practice, and competent risk management.

Content 

1. What is swing trading in stocks?
2. Understanding market trends and timing in swing trading
3. Key tools and resources I use in swing trading
4. My step-by-step swing trading strategy
5. Risk management and psychology in swing trading
6. Lessons I’ve learned from swing trading stocks
7. Frequently asked questions about swing trading stocks
8. Final thoughts

What is swing trading in stocks?

Defining swing trading in stocks

There’s no specific, universally accepted definition of swing trading. A general definition could describe swing trading as a longer-term approach to trading, compared to day trading or scalping. Swing trading aims to capture most or all of an instrument’s main continuous movement before consolidation or retracement. In practice, that means swing trades usually last two to five days, but swing traders might sometimes hold longer than that.

There’s no clear distinction between certain types of swing trading and position trading. Some traders would call any CFD positions held open for more than two or three days a swing trade. Others would say that holding for more than a week or two and up to a month is a position trade. This depends on the perspective of individual traders.

In some respects, swing trading is like a ‘bridge’ between traditional investing with positions held for months, years, or even decades and short-term speculation or trading like scalping. Swing traders usually focus much more on technical analysis (‘TA’) than investors typically do but less than scalpers or day traders.

Swing trading stocks could be a suitable approach for traders who can’t find the time to monitor positions or trade actively several times daily as scalpers and day traders usually would. Swing trading can also help you to increase your potential profit per trade on average and since fewer positions are involved compared to scalping or day trading, you can also save on spreads and (if applicable) commissions. In general, scalping is a less practical approach for stocks compared to forex or commodities because major American stocks might be closed during your active hours for trading.

Why I chose swing trading

I first discovered CFDs because of the carry trade, and still prefer longer-term strategies most of the time. Reasonably careful initial research of trades and then monitoring only once or twice a day after opening fits well with my lifestyle and other commitments. I do scalp and day trade sometimes, but I prefer swing or position trading in most situations. Holding fewer positions for longer compared to opening dozens or possibly hundreds of orders every week is far less of a mental load. 

This Apple stock chart illustrates what I mean about price movements lasting longer than a day. You can see that the price normally moves in the same direction, at least to some extent, for two or more consecutive days. There are some exceptions to this general rule, but overall I prefer to try to capture most or all of a directional movement over several days instead of making a new trade each day or just trading one day of a movement lasting up to a week.

I don’t think that swing trading CFDs on stocks is a replacement for investing. I’ve held deliverable shares in Apple and a wide range of other companies for many years and don’t plan on selling them anytime soon, barring some kind of personal emergency. Swing trading, for me, works in concert with investing, not in opposition.

Equally, there’s no reason not to combine swing trading with day trading. If you’ve set up a swing trade but the movement turns out to be intraday only, that’s fine: you can move your stop to accommodate, close manually, or simply wait for the next swing if you’re confident and don’t need the margin for something else. You can swing trade shares and day trade forex and commodities seamlessly with the same trading account at Exness. Swing trading isn’t for everybody, but for me, it’s a good balance between the potential stress and time cost of scalping on one hand and the long-term results of investing on the other.

Understanding market trends and timing in swing trading

Identifying trends in swing trading stocks

For stocks, or any other instrument, the most basic way to find trends is to count the number of new highs or lows. If you can find three or more, you probably have a trend with which you can consider trading.

The main caveat here is that major stocks historically go up over time, so it’s normally easier to find uptrends than downtrends. That said, remember the old saying, “Markets take the stairs up and jump down.” Stock crashes are usually swift and strong, and they rarely present excellent opportunities for me as a swing trader unless I can time my trading right, but this is often difficult.

Beyond simply counting the highs or lows, momentum is important. If you have a mature uptrend in which up candles are getting smaller and down candles bigger, prepare for a possible retracement or correction depending on the fundamental situation. The same can apply in reverse for downtrends.

Timing your trades

Swing traders use a combination of fundamental and technical analysis, usually with more focus on fundamentals than normal for CFD traders. For more on this, keep reading, however, if you’d want to know more about when to enter and exit, swing traders use technical analysis as their main set of tools.

The key timing factor for me is ensuring the trend is active but not yet oversaturated.

That means I count new highs (I don’t usually trade downtrends for stocks, but there are some exceptions to that), roughly gauge momentum from the sizes of recent candlesticks and use a relevant oscillator such as the stochastic to check that there’s no saturation there.

Key tools and resources I use in swing trading

Charting platforms and technical analysis tools

When choosing which platform to use for swing trading stocks, I usually prefer the Exness Trading Terminal and MetaTrader 5 (‘MT5’). MT5 has been the default platform for CFDs for many years because it’s generally responsive and relatively easy to use without too many bells and whistles. The Exness Trading Terminal offers a similar experience to MT5 in most practical respects, but its design and some operations are more beginner-friendly. Which one to use is ultimately a personal preference; I like both.

My technical analysis when swing trading stocks uses traditional patterns, patterns of candlesticks, and several uncorrelated indicators. Most of the time, I use several simple moving averages, including Bollinger Bands, a slow stochastic (15, 5, 5), average true range (‘ATR’), and parabolic stop and reverse (‘PSAR’). I prefer to enter and, where possible, exit when most of these agree on the signal. 

News and fundamental analysis

The main news sources I use for fundamental analysis are mainstream media and trading-specific websites. I usually read the Guardian’s business section and Yahoo Finance. For detailed breakdowns of releases and earnings, I use Trading Economics and Nasdaq. I don’t find it necessary to pay for access to Bloomberg or similar, but if that works for you, by all means go for it.

Usually, I use regular media to try and gauge overall sentiment. This is important for determining the context in markets generally. I refer to Trading Economics for specific data such as inflation, purchasing managers’ indices, and so on, which can display trends and suggest how sentiment might evolve in the near future. I use Nasdaq for specific details about the shares I’m thinking of trading, primarily financials, earnings, and different price-to-earner ratios. I think that actual, receivable dividends, as opposed to earnings per share, are less important for swing trading compared to long-term investing.

In my view, it’s essential to consider the fundamentals when swing trading stocks because they can show how a company is performing, both overall and relative to competitors. Broadly speaking, fundamentals give me the reason behind a trade while technical analysis helps me find how to execute it.

My step-by-step swing trading strategy

Screening and selecting stocks

Choosing a stock to trade isn’t usually difficult for me. I initially prioritize the top 50 or so shares based on market capitalization, so I’m looking for a market cap of about $200 billion or higher approximately as of March 2025. I also prioritize stocks that have historically been more liquid and active, especially tech.  I prefer to focus on companies with products or services familiar to me because I can evaluate their performance better that way; I can’t remember having traded any health stock as a CFD.

That leaves quite a small number of candidates for trading. I don’t think that’s an issue since, most of the time, having a small watchlist means you know a lot more about each symbol’s fundamentals, which is critical to being successful as a swing trader. Except in extremely unusual circumstances, you can find several potential opportunities to trade the Magnificent Seven (AAPL, AMZN, GOOGL, META, MSFT, NVDA, and TSLA) every month.

To be completely honest, I also have a personal bias in some cases, such as preferring AMD to Nvidia because the former’s products work better for me. However, I try to be aware of this bias when it occurs.

I think that the easiest way to track sectors is to use charts of funds compared with relevant individual companies:

Here’s a chart of XLF, the Financial Select Sector SPDR Fund, overlaid with three major banks. Comparing the recent performance of all four indicates that I could go with Bank of America (symbol ‘BAC’) if buying because it’s made the biggest recent loss, so might have more potential for recovery. However, I always compare each individual company’s financials and PE before moving on to technical analysis.

Setting up my trading plan

My main goal when swing trading stocks is to capture a movement over more than one day. I use a risk-to-reward ratio of at least 1:2, often significantly higher than this when the circumstances allow. The exact location where to set stops and targets is mainly based on the chart, so I’ll show you several examples of how I do it.

In early November 2024, I was looking at AMD. Overall sentiment on tech at the time was fairly neutral, but there was some concern over valuations, monetary policy was restrictive, and several other tech shares had recently made losses. When I saw the relatively large gap on 29-30 October, I initially expected it to be closed quite quickly since the earnings report on 29 October was, on the whole, slightly positive. However, I noticed the doji on 8 November, which I thought signaled more losses. 

There was a weak oversold signal from the slow stochastic but not from Bollinger Bands, so I judged the risk as acceptable. I set up a sell stop on 8 November at 146 USD with a target at 135 USD and a stop at 151 USD, a risk ratio slightly higher than 1:2. That’s a tight stop for a swing trade but my rationale was that, if there was a move above 150 USD, it would probably continue to close the gap. On the fourth day, I moved the stop to profit at 142 USD.

That trade was a success but a sudden change in sentiment could have led to a loss. Selling CFDs on shares is more risky than buying most of the time. I don’t consider any individual divergent factor to be a blocker against a trade, but the key rule is never attempt to trade unless both technical analysis and fundamentals broadly agree on the signal.

In January 2025, I was looking at Netflix. I thought that the overall situation for tech at the time was cautiously positive and that the upcoming earnings report would be at least slightly positive. When I saw the price movements dropping on 10 January, I expected any significant decline to be bought up quite quickly, so I set up a buy limit at 825 USD with a target at 990 USD and a stop at 800 USD, a very high ratio. If this pending order wasn’t triggered, I considered a higher market order; the target for the pending order was deliberately quite aggressive to take advantage of a potential positive surprise from earnings.

This was an unusually good result because the gap after the earnings report was a lot higher than I expected, but the report itself wasn’t so positive as to suggest an 80 USD gap. This trade could have gone wrong if earnings had disappointed, but I judged that the risk would be quite low given Netflix’s overall fundamentals, and the stop here was fairly tight relative to the potential profit. Trading over an earnings report can be a huge risk, but this risk, in my opinion, is lower when you have a reasonably good idea of how the report will look and be received.

Managing open trades

I think it’s important to monitor open trades every day, but as a swing trader, I avoid doing that obsessively. “Plan the trade and trade the plan” works well for me, assuming the initial plan is valid, but the more I look at the numbers moving, the more tempted I am to deviate from my plan, which usually ends badly. Of course, there are some exceptions to that: if I had a good trade running but the company suddenly suffers a major crisis, I would seriously consider closing the position immediately to avoid high volatility.

I usually don’t use trailing stops when swing trading because having a very precisely set stop isn’t important to me. Instead, I manually move stops up into profit starting from the second day, depending on the circumstances. If you prefer to use trailing stops instead and have tested them properly, there’s no reason not to do that.

Risk management and psychology in swing trading

Managing risk in swing trading stocks

The key rule in managing risk for CFDs in general, not just in swing trading stocks, is that the potential loss from any position must never be greater than the potential profit. For swing trading specifically, I think that the minimum ratio should be 1:2; usually, it can be a lot higher than that. Not only does such a ratio let profits run, but it also helps you reject bad ideas for trades when the technical situation does not permit a ratio of 1:2 or higher.

It’s also important to note that sizing positions are not specific to stocks. I think it’s best to set up all the parameters for a trade first, especially the stop and target, then set the size based on a maximum risk of about 2-5%. I usually risk closer to 5%, but for a very large account the risk per trade should probably be closer to 2%.

The most common practical mistake among traders is not cutting losses short; the most common theoretical mistake is greed. These apply to any type of trading or investing, from scalping CFDs to property or anything else. I try to stick to the rules above for risk to cut losses, be aware of my biases, and set realistic expectations for results.

Staying disciplined and emotionally balanced

I’m generally not a very emotional trader. Some of the main personality-based challenges I face as a swing trader are boredom and impatience. If I’m looking for a trade for over half an hour or so, I may try to force a bad trade out of the misguided feeling that doing something is better than doing nothing. That usually ends in a loss.

To avoid that, I try to set a cutoff time, after which I’ll stop looking for a trade and go do something else instead. That’s typically about 15-20 minutes, depending on the situation. This helps me avoid reckless trading decisions. “No position is a position” is a cliche, but I find it helpful to remember it regularly.

Maintaining discipline and avoiding impulsive decisions are as crucial to traders as they are to anyone in general. You need to ensure that you eat and sleep well, don’t consume a lot of caffeine or alcohol, and don’t spend too long in front of a screen. Take the time touch the grass, maintain relationships with family and friends,  pray or practice mindfulness in your own way regularly, and take a holiday every now and then. Doing these things puts you in a good mental space for thinking and analyzing properly.

Lessons I’ve learned from swing trading stocks

Mistakes that taught me valuable lessons

When swing trading stocks, I need to balance finding enough information to plan a trade well but not so much that it’s too late to implement. 

This trade I made in late 2024 for Microsoft was a bit of both, not enough information fundamentally and too late to implement technically. Just before the Fed’s meeting on 18 December, Microsoft’s shares had a relatively long streak of mostly consistent gains. I reasoned that this would continue fairly soon since the Fed was very likely to cut rates: after an initial retracement lower, the price movements would go back up again. I set up a buy limit at 440 USD on 18 December with the target at 465 USD and a stop at 430 USD.

The trade closed on 20 December with a loss. Usually, I can judge fairly well whether to enter around major news or wait it out, but this time, I hadn’t considered the technical situation or sentiment carefully enough. The lesson isn’t that I should avoid trading events entirely, just that I should keep focus on ones that are easier to predict, like some specific earnings reports as described above.

Equally, some things never went too badly here. A fairly close stop was good  because the price movements continued further down later, so I could’ve lost more with a more distant stop. A losing trade is a total loss only when I don’t learn anything from it.

The importance of adaptability

In the past, I would avoid trading CFDs on shares entirely during corrections or crashes, thinking that there could be a bounce anytime, but equally, it’s futile to try to “catch the knife.” There’s some element of truth there – I should definitely be more cautious during crashes – but it’s still possible to trade corrections as described above with AMD.

To some extent, adaptability comes with time if you’re committed to learning from both winning and losing trades. As I’ve become more experienced as a trader, both my hit rate and average profit per trade have gone up, while the average number of trades I make each quarter has gone down. It might be different for you if you’re a particularly cautious trader.

I also think it’s important to be flexible about combining different signals. If several uncorrelated indicators give me a buy signal and fundamentals align, but one indicator suggests selling, I can often ignore it and still have a successful buy trade. Even within a fairly strict system, there’s room for judgement and situational awareness even.

Frequently asked questions about swing trading stocks

How much time does swing trading require?

Usually, I spend about half an hour a week trading and monitoring open trades. I don’t count reading the news and generally thinking about investing and trading there because I read the news and discuss the financial markets with people every day, both at home and as part of my job.

There isn’t a simple, universal answer to how much time swing trading requires, but I think as a guide, you should spend less time actively trading and modifying positions than you would as a scalper or day trader.

Can beginners succeed at swing trading?

Yes, I personally believe that swing trading is one of the most beginner-friendly strategies in CFDs. This is because it usually involves fewer emotional decisions and judgement calls than many other approaches, so easily avoidable mistakes can be fewer.

That said, if you’re an absolute beginner to any type of investing or trading, you should start small and slowly with swing trading stocks. Build your knowledge and experience gradually and always learn something from both successful and losing trades.

What’s the minimum capital needed for swing trading stocks?

I think 100 USD is the absolute minimum, but if you have a bit more, say 500 USD or $1,000 USD, that’s better. Leverage for stocks is usually a lot less than many other CFDs – at Exness stocks have fixed leverage of 1:20. If you deposit 100 USD, you can trade one micro lot at a time of any major stock as of March 2025. But, it will take a while to see significant results with this kind of volume.

However, this question does not depend on the technical minimum for margin requirements. It also depends on your knowledge, mindset, and experience. If you’re a total beginner to investing and trading with 5,000 USD to invest, don’t put all of that into CFDs. I think you should split it around a range of different instruments.

Final thoughts

I like swing trading stocks as CFDs because it doesn’t require constant monitoring, yet I can achieve positive results with a well-executed plan. Combining fundamental and technical analysis is key to a higher likelihood of success. While some traders might think that fundamental analysis of stocks is a niche field that is difficult to break into, that’s not necessarily true if you focus on the important things and keep it simple where possible.

This article summarises my personal approach to swing trading stocks. However, I wouldn't recommend following this approach blindly. Instead, experiment to find what works for you and adjust what doesn't.The Exness demo account is a great way of doing that. A demo account simulates real trading conditions with virtual money, so you can test any approach you like without the risk of losing real money. It’s free to try and you can do it anywhere you have a device with an internet connection, so why not try it?