Swing trading sits between the rapid-fire world of day trading and the patience of long-term investing. It's a trading style that lets you catch short- to medium-term moves in the market without being glued to your screen all day. If you're new to trading and want a practical, strategy-first approach to trading U.S. stocks, this guide is for you.

‍

What Is Swing Trading?

‍

Swing trading involves holding a stock for a few days to a few weeks. The goal? Profit from price swings that unfold over that timeframe. Unlike day trading, swing traders hold positions overnight, aiming to capture larger moves with fewer trades.

‍

Pros:

• Less screen time than day trading
• Clear technical setups
• Greater flexibility for part-time traders

Cons:

• Overnight risk (e.g. earnings gaps)
• Requires knowledge of technical analysis
• Emotion can wreck your trade if you're not disciplined

‍

Core Swing Trading Strategies

‍

1. Pullback Trading (Buy the Dip)

‍

Find a stock in an uptrend and wait for it to pull back to support (often a moving average). Enter when price shows signs of bouncing.
‍

Example: Stock trending above the 20-day EMA pulls back and forms a bullish candle. Enter on confirmation the next day.

‍

2. Breakout Trading

‍

Buy when a stock breaks above a key resistance level or chart pattern with strong volume.
‍

Example: A stock trading under $50 for weeks breaks above with high volume. Entry point = $50.50, Stop = $48, Target = $55.

‍

3. Support/Resistance Reversals

‍

Buy near support, sell near resistance. Works well in range-bound markets.

‍

4. Chart Pattern Setups

‍

Patterns like bull flags, cup-and-handle, or triangles can signal trend continuation.

‍

Key Technical Indicators

‍

Moving Averages (MA / EMA)
‍

Use the 8-day or 20-day EMA to track short-term trend direction. Look for price bouncing off these lines.

‍

RSI (Relative Strength Index)

‍

• Overbought: RSI > 70 (consider taking profits)
• Oversold: RSI < 30 (potential entry on bounce)
  ‍

MACD (Moving Average Convergence Divergence)

‍

Look for MACD line crossing above signal line = bullish momentum.

‍

How to Enter and Exit

Entry Checklist:

• Is the stock trending?
• Is it at a support level or breaking out?
• Do indicators confirm?

Exit Options:

• Profit target (e.g., previous resistance or R:R ratio)
• Stop-loss below support (define risk before entering)
• Trailing stop to lock in profits as trade moves

‍

Risk Management

Position Sizing Formula:

$ Risk per trade = 1% of account

Position size = Risk / (Entry - Stop Loss)

‍

Example:

• Account size = $10,000
• Max risk = $100
• Entry = $50, Stop = $48 → Risk = $2/share → Buy 50 shares

Tips:

• Stick to a 1:2 or better risk-reward ratio
• Don’t move stops without a reason
• Never trade without a stop

‍

Managing Your Trades

• Hold for 2–10 days typically
• Check daily after market close
• Adjust stops as trade moves in your favor
• Scale out: Sell half at first target, let the rest ride with a trailing stop

‍

Common Beginner Mistakes

• Overtrading weak setups
• Ignoring stop-losses
• Going all-in on one trade
• Chasing hype without confirmation

‍

Tools and Resources

Charting Platforms:

• TradingView
• Thinkorswim
• Yahoo Finance (free)

Books:

• How to Make Money in Stocks – William O’Neil
• New Trader, Rich Trader – Steve Burns

Practice:

• Start with paper trading
• Backtest setups before going live

‍

Final Thoughts

Swing trading offers a great balance between risk, reward, and time commitment—but only if you treat it like a business. Stick to proven setups, manage your risk like a pro, and never stop learning.

‍

Take It Further with LevelFields AI

‍

Whether you're just starting or already familiar with swing trading setups, LevelFields AI is a powerful tool to streamline your edge. It helps traders identify high-probability setups based on news catalysts, pattern triggers, and backtested signals removing guesswork and saving hours of chart scanning.
‍

Pairing your swing trading approach with LevelFields AI can dramatically speed up decision-making and improve the consistency of your trade ideas.
‍

Start practicing today with a charting tool, paper trades, and let LevelFields help you find quality setups worth watching.
‍

Your edge is your discipline—and your tools.

‍

FAQs about Swing Trading for Dummies

‍

Is swing trading good for beginners?

Yes—swing trading is often better for beginners than day trading.

Swing trading:

• Requires less screen time
  
  
• Allows more time to plan entries and exits
  
  
• Reduces pressure from split-second decisions
  
  
• Encourages structured risk management
  
  

Beginners tend to struggle with speed and emotion. Swing trading slows the process down, which makes mistakes easier to identify and correct before they become costly.

‍

What is the 1% rule in swing trading?

The 1% rule means you risk no more than 1% of your total account on a single trade.

Example:

• $20,000 account
  
  
• Maximum loss per trade: $200
  
  

This rule exists to protect beginners from large drawdowns. Losing streaks happen—even with good strategies. The 1% rule ensures no single trade can significantly damage your account.

‍

What is the 3-5-7 rule in trading?

The 3-5-7 rule is a risk-exposure guideline, not a strategy.

It generally means:

• No more than 3% risk on one trade
  
  
• No more than 5% risk across related positions
  
  
• No more than 7% total portfolio risk at one time
  
  

This rule helps prevent overconfidence and concentration—two of the most common causes of early trading losses.

‍

What is the 90-90-90 rule for traders?

The 90-90-90 rule is a warning, not a formula.

It suggests that:

• 90% of traders
  
  
• Lose 90% of their capital
  
  
• Within 90 days
  
  

While not a precise statistic, it reflects a real pattern: most traders fail because they trade too often, use too much leverage, and ignore risk management.

‍

What is Warren Buffett’s 90/10 rule?

Warren Buffett’s 90/10 rule refers to a long-term investment allocation, not trading.

It suggests:

• 90% in a low-cost stock index fund
  
  
• 10% in cash or short-term bonds
  
  

The rule emphasizes simplicity, discipline, and staying invested—principles that contrast sharply with frequent trading.

‍

Why do you need $25,000 to be a day trader?

The $25,000 requirement comes from the Pattern Day Trader (PDT) rule in U.S. markets.

If you:

• Make four or more day trades in five business days
  
  
• In a margin account
  
  

You must maintain at least $25,000 in equity.

Swing traders are not subject to this rule, which is one reason beginners often start with swing trading instead of day trading.

‍