Swing traders make money by anticipating where stock prices are likely to move next and grabbing the chunk of profits when the move materialises. The goal is to capture short to medium-term gains over several days or weeks.
As there is a constant tension between bulls and bears, prices in the stock market oscillate. These oscillations are opportunities for swing traders to make money. Additionally, by focusing on how the price moves in a shorter time frame, traders can profit from both negative and positive momentum. Well-known catalysts for best swing trade shares are volatility and high volumes.
Before you read on, beware. Swing trading is significantly riskier than conventional stock buying and holding.
Where Can I Trade Swing Trade Stocks?
You can swing trade stocks with any online broker, but note that a conventional stockbroker might only allow you to “go long” and benefit from the upswing by buying shares. Contracts-for-difference (CFD) and spread betting brokers will also allow you to “go short” by (notionally) selling shares at the top of each cycle. To automate the process, find a broker that supports advance orders such as “limit orders” and “stop orders” that will automatically open or close a trade when the price hits your target level at the bottom or top of the cycle.
What Are Swing Trade Shares?
Swing traders look for volatility. The specific sector doesn't matter much when looking for ideal stocks for swing trading. Remember, the goal isn't a long-term investment, so you don't need to be too bothered about company fundamentals. Instead of looking at statistics that impact a company's long-term prospects, look for stock charts and signs that could influence a stock's short-term price action.
Profitable trading may come from swing stocks with three key characteristics:
- A catalyst: an event that is very likely to trigger powerful moves in stock prices. This could be power changes in company leadership, clinical trials by a pharmaceutical corporation, or unexpected earnings
- Volume: most stocks suitable for swing trading show more volume than usual
- Volatility: volume often goes hand in hand with significant volatility, and volatile stocks allow swing traders to profit from big, short-term moves using technical analysis.
How to Trade and Invest in Swing Trade Shares?
Open a Trading Account
Find an online broker with low spreads and a wide variety of global markets to trade. Open up an account in minutes (but you may need to prove your identity) and deposit your initial investment.
Your broker should let you select any of the stocks in its list to see a share price chart. Look for high volume and volatility, and a share price that seems to be oscillating (up and down) periodically and predictably.
Place Your Trade
When you find a candidate stock, press the “buy” button at the bottom of its oscillations and the sell button at the top. This process can be automated by placing orders that will trigger automatically when the price hits the levels you set.
Top 10 Swing Trade Shares to Trade
The usual holding period for a swing trade is short but substantial gains can be made if the moves are captured early enough. Liquidity is thus a crucial factor for each stock that the swing trader trades. However, traders need to note that stock market conditions are susceptible to change, so all trade decisions must be guided by the prevailing market condition.
Here is a list of the top ten swing trade stocks:
- Microsoft Corporation
- Advanced Micro Devices
- Starbucks Corporation
- PayPal Holdings
1. Facebook (NASDAQ: FB)
Facebook is social media's undisputed king, and it turns 17 years old this year.
With a $760 billion valuation at the time of writing and being S&P 500's sixth-largest company, Facebook recorded a 12% revenue growth and a 40% boost in net income in 2020.
Given the reopening of businesses post-pandemic and the massive influence of social media on almost everything we do, it makes sense for swing traders to closely watch the Facebook share price.
2. Microsoft Corporation (NASDAQ: MSFT)
The COVID-19 pandemic forced many firms worldwide to accelerate their adoption of cloud and internet-based collaboration software. This inherently means more market growth for companies like Microsoft.
So far, investors appear pleased with the overall year-over-year climb in Microsoft's sales figures and per-share earnings. This Washington-based software company reported that its commercial cloud revenue grew a whopping 34% in the last year and its gross margin widened by 4% the same year.
Given this enterprise's massiveness and growth, Microsoft stock may be considered a value play for swing traders.
3. Apple (NASDAQ: AAPL)
Amid the ongoing stock market rally (at the time of writing) tech companies seem to be doing quite well. The tech-heavy Nasdaq was up 1.4% by the end of January 2021, and Apple became a $2 trillion company.
With such expansive growth, swing traders are finding good opportunities in Apple stock. The company's performance in its last quarter reported strength in virtually all of its product categories, which is a sign of a promising future for its share price.
4. Salesforce (NYSE: CRM)
Some may shun Salesforce in favour of higher-growth stocks that trade at much higher valuations, but its takeover of collaboration software company Slack could warrant swing traders' attention.
Salesforce is a tech company specialising in cloud computing. With a $200 billion market cap at the time of writing, this enterprise has good prospects in its future, with significant revenue growth being expected this year.
5. Netflix (NASDAQ: NFLX)
Netflix has been on a roll, firing on all cylinders. Last year, Netflix stock rose 53% and seems to be on the radar of many swing traders these days.
The recent performance by Netflix is quite impressive given that the company was previously considered a perennial cash burner. Thanks to a free cash flow of $1.9 billion generated during the coronavirus pandemic, the company is finally producing cash like companies are supposed to.
Expert Tip on Investing in Swing Trade Shares“ Usually, a stock will trend in a precise direction. Over time, the share price highs get higher or the lows consistently get lower. However, sometimes the direction and/or momentum may change abruptly. As a swing trader, you need to spot these opportunities quickly. However, you should never place your trades blindly. Use indicators like the moving average to confirm trends and breakouts before entering into a trade. You should also learn how to read trading charts and interpret patterns. Most importantly, learn how to set good stop-loss levels. Doing so can save you from losing money when things don't go in favour of your trades. ”- VantagePointTrading Press Team VantagePointTrading Press Team
Why Invest in Swing Trade Shares?
Compared to some trading strategies, swing trading is not very time-intensive. The trader may, for instance, just spend two to three hours buying and selling in a day.
Applying the swing trading strategy in the market is all about timing market moves and making short-term trades for quick profits. The returns are quick, and with a well-put-together, diversified portfolio, it is possible to benefit through the ups and downs of the stock market.
The best part is that the stock market offers swing traders multiple investment vehicles to maximise their opportunities. For instance, you could trade single stocks, stock groups bundled in funds, large-cap stocks, growth stocks, and many others.
However, like all other financial trading strategies, swing trading carries significant risk, especially when you leave your trade positions open overnight. Good risk management is thus essential.
Frequently Asked Questions
The most common strategy to reduce risk and protect invested capital is by using a “stop order” if the share price goes too far down when you think it should be going up, and vice versa.
Yes. Most countries consider profits from trading as a taxable event, so you’ll have to pay some kind of capital gains or income tax on the money you make. In the UK (at the time of writing) you shouldn’t have to pay tax if you trade via spread bets or by trading in an ISA or SIPP account.
A regulated platform will not be shy about stating on its website that it is regulated. Most countries’ financial regulators, such as the UK’s Financial Conduct Authority, let you search their registers of financial firms online.
A regulated platform will often insist on “know your customer” (KYC) information to establish your identity, and its regulatory status should be stated on the website.
Yes. Most brokers have a minimum deposit requirement but it varies depending on the platform. Check with your broker before trading.
Most brokers allow you to open positions in stock exchanges around the world. Owing to the time zone differences in these exchanges, swing traders can trade 24 hours a day from Monday to Friday.