Back when I first began trading stocks, in the late ’90s dot-com bubble, I got sucked into the fast-paced world of day trading.
Making snap decisions and seeing immediate gains (with occasional, gut-wrenching losses) was like playing a thrilling, high-stakes game. Those screens became my world, and I was always on alert…
But, day trading was so damn exhausting! It required too much screen time, endless stress, and juggling too many trades.
Fortunately, I soon discovered the world of swing trading and left the chaos of day trading behind. I suddenly felt like I stumbled upon a hidden level in the trading world.
Instead of holding a position for a few minutes or hours, I was now sitting in a typical trade for days or weeks.
The pace? More measured. The rewards? Still exhilarating. And the cherry on top? I finally had a life beyond those relentless screens (press here to learn more about how swing trading compares to day trading).
Still, merely switching from intraday to a swing trading time frame was not the golden ticket. I needed proper direction—a proven stock trading strategy.
At first, I tried going at it alone, through trial and error, convinced I was the next trading sensation.
Spoiler Alert: I wasn’t.
I made many mistakes, shed plenty of cash, and my ego took a solid hit. I quickly found myself paying hefty tuition to the “school of hard knocks.”
But then, a game changer: I found a mentor—someone who had mastered the art of swing trading.
I studied, learned their system, tested, refined, and finally, the wins started steadily pouring in. This success soon transformed my swing trading side hustle into a full-time trading business, led me to write 5 books on my swing trading strategy, and create Morpheus Trading Group (MTG)—way back in 2002.
So, why am I sharing this journey? It’s because every trader’s path is filled with many choices.
While there are myriad swing trading systems out there, it can feel daunting to find the best individual strategy to learn. Every trader has a unique personality and risk tolerance, so there is no “one size fits all” approach to swing trading.
That’s why we penned this handy post that breaks down and compares the top 7 broad types of swing trading strategies for you. Note that our proven MTG trading strategy has evolved to blend several of these methods over the past 2 decades.
My hope is to arm you with the knowledge so you can confidently navigate and choose a trading strategy (or combination) that feels right for YOU. And as you’ll discover, the magic of our Wagner Daily stock picks lies in its distinctive, proprietary combination of trading techniques that has stood the test of time.
Ready for some helpful insights? Dive in and continue reading below.
– Deron Wagner | founder @ Morpheus Trading Group
After leaving the frantic hustle of day trading behind, I dove into the world of swing trading. But what exactly is that?
Simply put, a swing trading strategy is like your personal game plan. It gives you a set of rules to play by when you’re eyeing the market, aiming to pocket some profit from the market’s price shifts that happen over days or weeks.
Now, not all swing trading strategies are made the same. Some rely heavily on charts and trends (that’s technical analysis), while others dig into company news and financial reports (hello, fundamental analysis). But they all share a common goal: pinpointing those golden moments to jump into or out of a position.
Why swing trading? Well, it’s the sweet spot for folks like us. We’re not glued to our screens every minute like day traders, but we’re also not in it for the long, long haul like Warren Buffet. We ride the market’s waves, aiming to catch the best ones.
Whether you’re into stocks, crypto, options, or any other market, there’s a swing trading methodology tailored for you. Furthermore, a winning swing trading strategy works equally well in any global stock market—from New York to London to Bombay.
At the end of the day, it’s all about leveraging those short-term price changes to our advantage, and doing so smartly to keep risks at bay.
Below is a succinct comparison of 7 of the most popular broad types of swing trading strategies, including the Pros and Cons of each.
Also known as “trend trading,” this popular technique seeks to identify stocks that are already in solid uptrends or downtrends, then enter trades in the same direction of the trend. This typically means buying during uptrends and/or selling short during downtrends. Traders utilizing this strategy typically use moving averages, trendlines, and other technical analysis tools to determine the direction of the trend, as well as when to enter and exit positions.
Breakout trading involves entering a position as early as possible within a new price movement or trend. Typically, this technique relies on identifying key resistance or support levels on a chart, then entering trades when prices ‘break out’ from their prior ranges.
As with trend-following, the breakout trading strategy relies heavily on simple technical analysis tools and chart patterns to spot breakouts, and to know the right time to buy and sell.
A pullback strategy revolves around taking advantage of shorter-term price retracements within a longer-term trend. Traders look for temporary price reversals (“pullbacks”) to enter at a more favorable point before the main trend resumes.
Pullback trading is often complementary to breakout trading, as breakout traders who miss a fast-moving breakout can simply wait for a minor pullback to get a lower-risk entry point. The first pullback to short-term support after a breakout often provides a relatively low-risk entry point that leads to similar results as buying the breakout.
Momentum traders seek to take advantage of market volatility by targeting stocks showing strong price movements on high volume. This can be driven by news releases, earnings reports, or other high-impact events.
Relative strength trading, a key aspect of our Wagner Daily swing trades, is a highly reliable type of momentum trading. Technical indicators such as Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) can also be used to identify momentum and determine when to enter and exit a trade.
Mean Reversion is a swing trading approach that identifies stocks sharply diverging away from their historical average prices, then entering trades with the expectation those stocks will eventually return to their mean. Traders use statistical tools, such as Bollinger Bands, to pinpoint stocks trading outside their typical ranges, then determining when to buy and sell.
The arbitrage strategy involves taking advantage of discrepancies in the price of a stock in different markets, or between different financial instruments. For example, a trader might buy a stock in the cash market and simultaneously sell a futures contract on the same stock at a higher price. A profit could be realized by the difference in prices.
Traders who employ a news-based trading strategy enter trades based on how the market is expected to move in response to recent or upcoming news or events.
Unlike the other strategies above, news-based trading combines fundamental analysis (assessing news events) with technical analysis (predicting price movements) to spot ideal trade setups that are primed for news-driven moves.
Additionally, note that some swing trading strategies achieve the best results by using a combination of the above trading techniques.
The MTG swing trading strategy, for example, is a trend-trading system that seeks to profit from explosive breakouts and lower-risk pullbacks in leading growth stocks. In certain market conditions, our methodology also focuses on relative strength momentum trading.
Overall, any strategy for swing trading can be lucrative if it enables you to correctly identify and capitalize on price changes in the market. However, it is important to realize that all swing trading strategies carry their own set of risks. Always carefully evaluate your trades and manage risk accordingly.
Starting swing trading can be a great way to generate income as a side hustle and potentially grow your wealth, but it’s important to approach it with a solid plan and realistic expectations.
Here are 7 steps you can take to start swing trading:
It’s important to remember that swing trading is not a means to getting rich quick. Rather, successful trading requires a high degree of both patience and discipline.
Look, when I first stepped into this arena, I too was hunting for that elusive “holy grail”—that magical strategy promising untold riches.
But here’s the kicker: there isn’t just one perfect swing trading methodology. Yep, each strategy has its highs and lows.
Here’s a golden nugget I’ve learned over the years: the best trading strategy is not about secret charts or mystical formulas. It’s about consistency, understanding your risk, and, above all, finding what aligns with you.
If a strategy doesn’t gel with your instincts or feels like trying to fit a square peg in a round hole, it’s probably not for you.
When I was in your shoes, starting out, I wish someone had told me to just risk a smidgen of my capital, test the waters with different methods, and truly uncover what felt right. But, since we can’t turn back time, I’m passing on this wisdom to you now.
Now, I won’t say the Morpheus swing trading system is for everyone, but it’s been my rock. It’s a calm, end-of-day strategy (ah, the days before my full-time trading gig!) with flexibility in diverse market conditions. It aims for those exhilarating wins in bull markets, while playing it cool in bear markets.
Over 70,000 traders and investors have taken a peek into the MTG swing trading strategy through The Wagner Daily PRO report since 2002. Are you ready to join them?
Dive in now and discover a simple, effective trading system that resonates.
Got questions? Just press the chat icon to drop us a line.
There is no one-size-fits-all strategy for swing trading, as it largely depends on your individual risk tolerance and investment goals. However, a trend-following strategy based on technical indicators is one of the most popular types of swing trading strategies.
This includes technical swing trading techniques such as breakouts, pullback buying, and momentum trading. Many of these methods for combined and integrated with the use of candlestick charting for further technical insight.
Swing trading can be a consistently profitable side hustle, and can even lead to a full-time career. However, the profitability of swing trading varies widely, and depends primarily on a trader’s skills, strategies, and risk management practices.
Of course, the size of an individual’s trading account plays a huge role in the amount of profits that can be earned. Additionally, the markets are always changing and what works well in one market environment may not work as well in another.
There is no one indicator that is considered the “best” for swing trading, as different indicators may be more suitable for different traders and market conditions.
At MTG, we prefer a simple swing trading method based primarily on price, volume, relative strength, and support/resistance levels (moving averages). Other swing traders may also utilize more complex technical indicators such as Bollinger Bands, MACD, and RSI.
Note that no single indicator can give a complete picture of the market. As such, many traders combine multiple indicators and chart patterns to provide a more comprehensive analysis.
Swing trading can be a great way to generate income, but it is not a get-rich-quick scheme. While It is possible to make significant profits through swing trading, it’s important to have realistic expectations.
It takes time, patience, discipline, and a strong understanding of the markets to be successful. Consistently profitable swing traders typically have a solid strategy, a well-defined risk management plan, and the ability to control their emotions while trading.
Any style of trading, from day trading to position trading, carries a certain level of risk. The markets are inherently unpredictable, and there is always the possibility of losing money. However, the level of risk can be managed through proper risk management techniques and having a well-defined trading plan.
Swing trading typically involves holding positions for a few days to a few weeks, which means that the level of risk may be lower than a day trading or scalping style, where positions are held for a very short period of time. However, swing trading strategies may carry a higher risk of market-moving news events outside of market hours.
Swing trading is a style of trading where investors hold positions for a period of a few days to weeks, with the goal of profiting from price movements in the markets. The goal of swing trading is to identify short-term trends in the markets, and to profit from buying low and selling high, as the stock price “swings” up and down. Press here to learn about the pros and cons of swing trading, and how it compares to day trading.
All styles of trading carry a certain degree of risk. Specific risks associated with all swing trading strategies include: market risk, volatility risk, liquidity risk, emotional risk, and personal risk management of positions.
The 1% rule in swing trading is a risk management strategy used by traders to limit their potential loss on any single trade to just 1% of their total trading capital. By adhering to this rule, traders ensure that even a series of losses won’t significantly deplete their account, allowing them to continue trading and potentially recover from downturns.
To implement the 1% rule, a trader calculates and sets a stop-loss level for each trade such that the maximum loss, if the trade goes against them, is only 1% of their total account balance. This disciplined approach promotes longevity in the trading world and encourages traders to analyze trades more thoroughly, focusing on high-probability setups rather than chasing every market movement.
While exact figures can vary based on market conditions and individual skill levels, it’s often cited in the industry that around 10% of swing traders are consistently profitable. This percentage might seem low, but trading is a challenging endeavor that requires a combination of skill, discipline, risk management, and emotional control. It’s essential to understand that many traders might experience short-term successes, but maintaining consistent profits over the long term is more difficult. This is why it’s crucial to learn a rule-based swing trading technique that has been proven over time–such as the 21-year track record of MTG.
Factors influencing this percentage include the steep learning curve for beginners, lack of a well-defined trading plan, inadequate risk management strategies, and the psychological challenges associated with trading. However, with proper swing trader education, a sound strategy, and continuous self-assessment, traders can improve their chances of being part of that profitable percentage.
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