How to shortlist the stocks for swing trading?
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If you want to do swing trading, you have to keep an eye on both fundamentals and technicals of the company. Shortlist the stocks based on the below-given parameters
Liquidity: Choose high liquidity stocks (Traded volume of the stock should be high)
Potential of the Stock: Compare the potential of the stock with the competitors of the same sector.
Choose Sector Wisely: Choose the sectors which have high potential in the coming months. Not all the stocks perform well throughout the year. So, choose the stocks based on the season.
Repetitive Patterns: Check for repetitive patterns, for example if the stock is trading in range bound, swing traders earn small profits while the stock is in that loop. Most of the swing traders also take trade when there is a breakout from the range.
You will have to search for stocks where it forms swing low or swing high and then take the position (long or short) after it touches swing high or swing low.
There are some potential swing trading patterns & indicators that most of the people use.
A few of them are
These are the most common and popular patterns that gives maximum returns for swing traders.
The daily routine of the swing trader is to search for the above patterns in the shortlisted stocks and take the position after the breakout or breakdown from the pattern.
Swing Trading Stock Suggestions for Feb 3rd Week 2022
1. IndiaBulls Housing
Symbol: IBULHSGFIN
The stock has formed a rectangle pattern in the daily time frame and it took support at the bottom line and formed a bullish candle.
Entry: 205
Target: 265 (Top line)
Stop loss: 194
2. Bharat Heavy Electricals
Symbol: BHEL
Entry: 57
Target: 62
Stop Loss: 54.5
Note: The information provided is for educational purposes only, do contact your financial advisor before taking up any trade.
You can select the stocks for swing trading based on the following parameters
1. Support & Resistance
2. Triangle or Rectangle Patterns
3. Bollinger Bands
4. Weekly Central Pivot Range (CPR)
5. Pivot Points
6. Price Action
7. Fundamental Analysis
Taking up a trade based on fundamentals gives fewer returns and you have to hold it for long period.
Technical analysis gives you accurate entry and exit levels.
Stock Selection for Swing Trading:
Let us consider the example of Khaitan Chemicals & Fertilizers (KHAICHEM) stock.
In the last six months, it has formed a triangle pattern and given a breakout on 6th January 2022. Now let us discuss the entry, target, and stop-loss of the above stock.
Entry: As we can see in the image, the stock has given a breakout on the 6th January 2022 with a strong bullish candle. Your entry should be on 7th January. So, your entry price should be somewhere around 70 rupees.
Stop-Loss: The stop loss should be below the trend line or below the breakout candle. In this case, the stop-loss is 66.
Target: The target should be at least 1:2, i.e., Rs. 78. But in this case, the stock has given around 63% returns in just 2 weeks’ time. The risk-reward ratio, in this case, is 1:10.
Swing Trading Stock Selection for Beginners:
As a beginner, you should not enter the Mid & Small Cap stocks for swing trading. The sudden fall/ huge gap downs will end up you in huge losses.
Here are a few tips to select the stocks for swing trading (for beginners):
Best Stocks for Swing Trading from Nifty
As I mentioned in the above lines, here are a few stocks for swing trading.
Disclaimer: I am not the SEBI registered financial advisor, do take the positions based on your own analysis. The information provided in this article is for educational purposes only.
Swing Trading Based on Volume:
Even though the breakout trades give good returns, there are also some chances for reversal after the breakout.
Breakouts with increased traded volume add more probability than breakouts with low volume.
Check whether the traded volume on the breakout day is high/ low compared to the previous trading sessions.
This simple observation will increase the win rate of your trades.
Select Stocks for Swing Trading Easily
Stock Selection is the key to make profits in swing trading. When you choose swing trading in stock market, you need to make a better selection of stocks.
At the ground level analysis, you should follow a systematic procedure that allows you to make a precise selection of the stocks. It is like this,
When you complete the preparation of the stock list, you must have at least 25 stocks in record.
Exponential moving average, EMA, is very lucrative and if you entertain EMA, then they can be a set trap in your trading, hence try to setside.
Swing Trading Stocks: Thumb Rules
The experts give us a layout to judge a swing stock and below are the established thumb-rules before you make a selection of it.
Market Direction:
You must observe the market direction, if the stock price is on rise in the current scenario, and market volatility is in the right balance then you can opt to go for such a stock.
Another way to check for the best stocks in swing markets is to draw the corporate news, and monitor stock indexes.
Maintain Directional Approach:
You must see for option call, and option put trades and depending upon your objective, you should stick to buy or sell indications.
Utilise the technical research and identify the companies which give good results within the timeframe.
Keep a note of price volatility and the volume of a stock and based on which, you can screen a stock.
Stock Liquidity:
You can perform swing trading conveniently only when the stock is traded in larger volumes and moreover, high trading volumes represent a low risk in a trading scenario.
Performance:
Your purpose of checking the performance of stocks in a sector is to check for the stocks that have outperformed sector indices.
Follow Trading Pattern:
You can adopt the swing trades by following the trading patterns. You will have to wait until the stock breaks out of the trading range, enter it, and then make small profits by moving in the stock trend direction.
Clear uptrend:
As swing trading avoids high volatility stocks, you must focus on equities that produce little price variations leaving almost no gap in the price line.
Stock Selection for Swing Trading in India
I usually follow the following steps to select the stocks for swing trading in India
Step-1:
Trend: Look for stocks in a clear upward or downward trend. Trends can indicate potential price movements.
Step-2:
Volatility: Prefer stocks with moderate volatility. Too much can be unpredictable, but too little won’t provide sufficient profits.
Step-3:
Analyze Fundamentals: Review the company’s financial health, earnings, and management team. A strong company is often a good choice for swing trading.
Step-4:
Check Volume: Ensure the stock has good trading volume, indicating enough interest and liquidity.
Step-5:
Technical Analysis: Study chart patterns, price action analysis like support, resistance, moving averages, etc. They can give insights into potential price movements.