How to Pick Stocks for Swing Trading

Understanding how to choose the right stocks in swing trading is just the tip of the iceberg – but it’s also the most important step in your journey to becoming a successful swing trader.

This type of trading – in comparison with, say, day trading – lets you hunt a larger section of the overall market with targeted moves. But it also can leave you open to the volatility of overnight, after-market-close trades.

Swing trading has advantages and disadvantages over day trading. Here’s a breakdown of what you need to know.

What is Swing Trading?

Swing trading is as much as art as it is science.

It attempts capturing short-term gains from a stock or other instrument over the course of just a few days to weeks. Investors analyze various stocks technically, looking for the right opportunity.

They also analyze fundamentals, price trends, and price patterns. Swing traders use an established ratio of reward to risk based on stop losses and profit targets.

Is Swing Trading Easy?

If you’re new to intermediate term trading, swing trading can be hard to get the hang of initially.

Professional investors who have been doing this longer know more about the companies in question, can often employ more leverage and generally don’t pay commissions as high as newbies – though Robinhood (HOOD) has largely leveled that playing field.

That said, swing traders are limited in what they can trade and how much risk they can take on. Plus, they’re up against professional investors with deep pockets.

What Stocks Are Best For Swing Trading?

Some of the best stocks to start your swing trading career include:

How To Pick Stocks for Swing Trading

Once you know the sectors you want to focus on, start looking for the stocks that fit your criteria. The basic criteria that most swing traders use includes:

  1. Liquidity
  2. Sector outperformance
  3. Uptrend is smooth
  4. No over-extensions in daily charts
  5. Stock price is showing relative strength in a leading sector

Let’s take a look at the first three criterions.


Liquidity’s importance can’t be overstated enough, but sometimes the idea behind it can get misinterpreted by newbie investors.

What’s critical about liquidity is that you can enter and exit your positions rather quickly. This might seem obvious but if you ever got caught trying to sell a boatload of penny stock shares and realized you were moving the market, you know just how deep the pitfalls of poor liquidity are.

Outperforming its sector

The same way stocks are compared to the overall market, you compare stocks to the sector, or industry, it’s in.

You want to find stocks demonstrating relative strength in strong performing sectors. This offers you the best possible odds at winning, but the best overall odds of finding a trend that turns your “I’m gonna sell this stock in three days” into a position that keeps on winning if you decide to hold.

Smooth uptrend

Smooth uptrends mean you won’t see a volatile, jagged uptrend: sure, the stock might pull back a tad on certain days, but if a stock has momentum and then pulls back substantially only to soar again, this could be a red flag.

This could indicate shifts in sentiment. And that means weaker investors – the ones with unsteady hands – will sell, sell, sell.

What Time Frame is Best for Swing Trading?

While past performance isn’t necessarily a reliable indicator of future success or failure, the longer you’re able to track a given stock, the better and more reliable signals you’ll get.

Drilling down the time frames is the tough part. The more narrowly you focus, the less clear it all seems thanks to false trajectories and other “noise.” The ideal move is to track stocks over a longer period of time so you can identify primary trends.

Once you unearth those trends, you know your general time frame and you can use it to define middle-of-the-road trends. This general time frame also helps you to identify shorter time frames that can define short-term trends.

Using multiple time frames can help:

Swing traders: These traders typically look at the daily charts to make their decisions. With time frames defined, the swing trader can use a weekly chart to uncover primary trends and one-hour charts for very short-term trends.

Day traders: Say a day trader trades using 15-minute charts – hour-long charts would define primary trends and 5-minute charts would define short-term trends.

Position traders: These long-term traders look at weekly charts typically, so they could use a one-month chart for primary trends and day-to-day charts to refine their entry points and delineate exit points.

The specific time frame you choose is unique to you. You basically choose the time frame you are most interested in. From there, pick a time frame a little longer and a little shorter than your main time frame in order to complement your findings.

In essence, your main time frame illustrates your trading signal, the long-term chart defines trends, and the short-term chart shows where you either want to buy or sell.

Above all, be wary of getting swept up in all the noise of charts. Over-analyzing is a very real struggle.

Is Swing Trading Easier Than Day Trading?

Swing trading isn’t as time-intensive as day trading, and swing traders typically work within longer time frames than a day trader.

Swing traders aren’t necessarily looking for incremental wins – they want to make one really great trade.

Is Swing Trading or Day Trading Better For Beginners?

Beginners’ luck is certainly a “thing”, but newbies are better suited for swing trading over day trading.

Day trading puts you square in the midst of major players with the upper hand duking it out, all with the most advanced tech and software at their disposal.

Swing trading, on the other hand, only requires a standard computer, free software, and an internet connection.

What Stop Loss Should You Use Swing Trading?

All types of trading are rife with inherent risk. That said, swing trading takes a more cautious approach – a more calculated risk. It’s been said that swing traders are more at the mercy of the market in general, whereas day traders watch for catalysts in the moment. These catalysts are typically unrelated to the market.

Ensure your swing trades line up with the overall market and accept that you will lose from time to time.

It’s in these instances that it is best to get out while the going is good. Cut your losses using a stop loss order; it helps you hold onto your gains and lets you keep a watchful eye on your stock picks for later entries.

Now, is it essential to use a stop loss in swing trading? Not necessarily. If a specific trade is behaving as you expected, consider a trailing stop loss. This method can keep you moving toward profit while keeping the loss percentage the same as the general market moves in your favor.

Considering swing trading? Stay on top of your time frame and research, and you might just get the hang of swing trading.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.