How to Select Stocks for Swing Trading?

5 Tips for Picking the Right Stocks for Swing Trading

When it comes to swing trading, each retail trader has its own strategy to select stocks. Some choose scripts based on technical analysis, some on fundamental analysis, some follow price-action based strategy, etc.

All of them swear by their strategy.

But do you really think it’s enough?

Let me give you behind-the-scenes tour.

Swing trading or Short-term trading is more about keeping track of surprises like news, announcements, sudden political changes, etc. And mix this up with other crucial factors like technical analysis with a pinch of fundamental analysis, then only you will be able to find out stocks for swing trading.

Easier said than done?

Well, not anymore.

Through this article, we will simplify things for you to select stocks for swing trading with minimum time investment.

Follow this step-by-step procedure to select stocks for swing trading

Collect a List of Potential Stocks

When it comes to swing trading, plenty of options are available. But you can’t deny the fact that you don’t have enough time to keep track of them all.

What you can do is collect a list of stocks having maximum potential of earning profit from swing trading.

Here’s the list of stocks, well-fitted for swing trading, you can start with

Nifty 30 Stocks
Bank Nifty Stocks
Nifty High Beta 50 Index

Note: You will find list of all these stocks on NSE

Put all these stocks in your basket. Upcoming steps will tell you which stock you should keep and which to eliminate.

Look for High Volume

This is where beginners always make mistakes. They do know that high volume is important to choose stocks, but they often fail to consider that high volume alone is not useful. It can be a fake signal.

High volume is useful only when it is more than daily average volume + there is change in price as per the high volume.

For e.g. if you see that there is price increase + high volume, it’s a good stock for swing trading. Or if you see that there is high volume but no change in price, you should avoid such stock.

Now, from your list of stocks, you have to pick up those having high volume as well as price change accordingly.

Check Out Calendar Events

When you decide to wait for more than one day, to gain profits from your stocks, you have to be aware of all changes that are going to take place. This decreases your chances of stock accidents.

Once you select stocks with high volume, you are left with a limited list. This makes it easier for you to check out upcoming calendar events of particular stocks. Also, have a look on other global and political events.

Stocks with upcoming news or events and stocks that are going to be affected by global events should be your first priority to take a step on.

Set a Bunch of Minimum 25 Stocks

Here’s most underrated secret of swing traders:

They mostly play with a few familiar scripts, turn wise, instead of searching for new scripts each time.

To play like professional traders, make sure you have at least 25 stocks in your bucket.

From your list, each time you will come up with a few stocks, say like 5 stocks, that go well with Exponential Moving Average.

Avoid the Trap with Exponential Moving Average (EMA)

Even after following all steps, traders often get trapped under contraction period or sideways range. Exponential Moving Average helps you avoid that trap.

Basically, EMA adds more weight to recent price data.

For e.g. stocks with price change + breakout/breakdown from EMA is more trustworthy than stocks with price change but no change in EMA. Similarly, you can apply EMA with high volume. Or you can combine all the three (price, high volume, EMA) to play on a safer side.

Note: You can follow any EMA, like 20,50 or 100, based on your trust or practice.

Use screener to check out EMA of your stocks. This saves you a good amount of time.

Now you are ready to Swing

With the above steps, each time you get a few familiar stocks to play with. After a certain period you will start liking them as you get the hold of their behavior. This makes swing trading extremely easy for you.

Keep your list ready because we will be back soon to tell you which indicators give you a helping hand in swing trading.