Swing Traders focus on capturing gains from strong price movements over weeks to months.
Swing Trading bridges the gap between day trading, in which traders open and close positions within the same day, and position trading, in which traders hold positions for many months to years.
Swing Trading presents the opportunity to capitalize on strong price movements between the basing formations of an uptrend.
Acting quickly when price signals trigger requires a certain type of stock to focus on. Basic liquidity criteria should be used in conjunction with all of your screens.
Adding the above liquidity criteria to your screens will ensure you are focused on stocks with large institutional interest while allowing you to enter and exit trades quickly.
Keep in mind that swing trading involves capturing a substantial price advance while focusing on high-moment stocks.
This blog will help you dive deeper into specific strategies for identifying and capitalizing on these sizeable price swings.
Highest Daily Volume Preset
When swing trading, you want to navigate quickly in front of large institutions when they begin accumulating shares. Institutions leave their “footprint” on charts when you see huge volume spikes.
The Highest Volume Edge looks for 4 important characteristics:
- Highest Daily Volume Ever
- Highest Daily Volume since IPO
- Highest Daily Volume in a Year
- Highest Daily Volume since Last Earnings
This Screener Preset utilizes the “OR” function to scan for all stocks exhibiting any of the Highest Volume conditions.
Relative Strength New High
Relative Strength (RS) measures a stock's performance compared to the broader market. When searching for the leading stocks in any market cycle, look for stocks with RS lines making new highs.
When the RS line is at highs, the stock has been outperforming the market.
Change the timeframe to align with the current market conditions and your trading style. Pay close attention to stocks with RS lines making New Highs Before Price.
52 Week New High
Leading stocks outperform the market and continuously make new highs. Routinely screen the New 52 Week High list when searching for the strongest stocks to Swing Trade.
Stocks that make new highs will continue to make new highs.
Add a strong Daily Closing Range (DCR) to ensure the new high followed through with strength.
Gap Up
Gaps are a clear sign that traders were surprised by any recent event. A gap can occur from an earnings report, a news release, a change in market sentiment, or any other supply and demand imbalance.
Oliver Kell states: “The Street is caught off guard” when there is a significant gap up.
Look for stocks that gap more than 3% above the previous close and also close positive for the day with at least a 5% gain.
Up On Down Days
Always look for signs of Relative Strength. A stock that is up on the day when most stocks are down is a clear sign that this stock is outperforming the market.
You can also add a Daily Closing Range criteria to this kind of screen and change the percent change to reflect the current market conditions.
When market action is extremely poor, stocks that are down, but less than the indices, are still outperforming.
Up On Volume
Volume spikes are a sign that supply greatly outweighs demand. Regularly screen for stocks that are up on the day with increased volume.
Look for stocks that continue to see an increase in accumulation volume.
Volume supports price action. Closely monitor stocks that are up, and volume surpasses its 50-day moving average.
Doublers
When a stock has the power to increase 100%, there is clear demand for the stock. Eventually, the strongest stocks will consolidate the gains, form a base, and continue their advance.
Stocks that double can double again. Screen for stocks that have doubled in the past year.
Swing Traders should watch stocks that double, form a base, and then get ready for when the price breaks above recent highs.
High ADR
Swing Trading is a faster-paced style of trading that focuses on highly liquid, quick-moving, leading growth stocks. Swing Traders should look for stocks with a High Average Daily Range (or Average True Range) to outperform the indices.
Focusing on stocks that have larger moves than the indices helps Swing Traders achieve super-performance.
Add this “OR” group to your screens to filter out any slow-moving stocks.
21EMA Pullback
Many growth stock traders use the 21 Exponential Moving Average (EMA) as a guide to determine the intermediate-term trend. Look for support on pullbacks during prolonged uptrends.
When a stock begins to consolidate gains after a strong uptrend, Swing Traders target supportive action against the 21ema.
This Screener Preset focuses on only the strongest stocks that are within a +/- 2% range from the 21EMA.
Relative Strength Days
Relative Strength (RS) Days occur when a stock outperforms the market. Screen for leading socks by simply counting the number of RS days.
Stocks showing recent RS days over 60% of the time are among the top-performing names.
This Screener Preset will show the stocks displaying RS Days 62.5% of the time, ranging from 5 to 60 days.
Putting It Together
Swing Trading targets rapid price movements as stocks move between consolidating bases. Capitalize on strong price trends by entering stocks breaking out of basing formations during ideal market conditions.
Focus on high liquidity to identify stocks backed by big institutions. High trading volume allows for quick entries and exits when taking advantage of strong trends.
Look for strong momentum when you are screening for stocks.
Keep Relative Strength at the forefront of your search to concentrate on stocks outperforming the market.
Use Volume clues, high percentage gains, and new highs to direct you toward the leading stocks of any market cycle.
