Core Strategies and Practical Guide to Swing Trading

Among many investment methods, swing trading has become the preferred choice for many investors due to its balance of returns and flexibility. Compared to long-term holdings that require years of patience or daily monitoring for intraday trades, swing trading uses medium-term cycles of weeks to months, leveraging market fluctuations to buy low and sell high, achieving relatively stable profits.

Why is swing trading worth learning?

The appeal of swing trading lies in its practicality. It does not require investors to capture every short-term fluctuation nor to freeze their funds for years. As long as a stable return of about 50% can be achieved, the goal is met. This “trend-following” characteristic allows ordinary investors to participate.

The key is that swing trading relies on “events with longer fermentation times”—such as changes in industry fundamentals, policy adjustments, supply and demand imbalances, etc. These events do not reverse in the short term, giving investors ample time to observe, adjust, and profit.

Five key strategies for swing trading

Interest rate hike and cut cycles linked to exchange rates

Central bank rate hike or cut cycles typically last six months to over a year, presenting classic opportunities for swing trading. For example, when the Federal Reserve begins a rate hike cycle, the US dollar usually enters a multi-month upward trend. Investors do not need to precisely predict the top; they only need to monitor whether inflation or employment indicators have eased. When these indicators peak and start to decline, it’s a good exit point. The win rate for such trades is often high.

Long-term opportunities from technological breakthroughs in industries

When a revolutionary technological breakthrough occurs in a certain industry, market funds tend to chase related concepts for an extended period. Although whether the technology will truly change the industry landscape remains uncertain, the market hype cycle can last several months. At this point, instead of betting on a single company, it’s better to choose related industry indices or ETFs, which can participate in the upward trend while diversifying risk. The exit can be timed before breaking previous highs or before major earnings reports; the key is not to be greedy and hold the entire swing.

Long-cycle opportunities from supply and demand imbalances

Some products are prone to short-term supply and demand imbalances due to long production cycles. Crops require seasonal waiting, and semiconductor capacity expansion takes years. These fields are suitable for swing trading. When supply constraints push prices higher, even if the problem cannot be solved in the short term, it can form an investment cycle of several months or longer. Conversely, products like masks that can be rapidly increased in production are not suitable for swing trading because market changes are too fast.

Liquidity policies and hedging assets

Global money supply is influenced by government policies, but real economic growth is limited. When central banks inject large amounts of liquidity, the “money” in the market depreciates relatively, prompting investors to compete for limited hedging assets like gold, Bitcoin, etc. These assets are especially suitable for long positions during Quantitative Easing (QE) periods and for profit-taking during Quantitative Tightening (QT). The same logic applies to scarce resources like urban real estate.

Strong breakout in technical patterns

When an asset breaks out upward after a long consolidation, it indicates that funds are optimistic about its future performance. The market will spontaneously form a “momentum,” attracting more participants to follow. Swing traders should “buy high and sell low,” daring to buy these strong assets, but also need to verify if there is a “long fermentation event” supporting the move. Only then can they ensure a high success rate.

Choosing suitable trading targets

Not all assets are suitable for swing trading. The ideal targets should have: stable trends, clear direction, and sufficient liquidity.

Prioritize: major indices, industry indices, forex, gold, and other macro assets driven by long-term factors with obvious swing characteristics.

Be cautious with individual stocks: Stocks are more susceptible to single events causing sharp fluctuations, and there is a higher risk of manipulation by major players. If trading stocks, choose large-cap leading companies that are representative of the industry and influenced more by overall industry cycles than by individual order changes.

Four-step swing trading operation framework

Step 1: Track macro trends
Long-cycle events such as economic policies, industry development, and geopolitical supply are the foundation of swing trading. Follow news daily and understand how these events may impact the market.

Step 2: Identify high-quality targets
Select assets most relevant to these macro events, with the most stable trends and sufficient liquidity. Avoid thinly traded assets to prevent slippage or being trapped during exit.

Step 3: Combine technical and fundamental analysis
Fundamentals provide the overall direction, while technical analysis helps pinpoint precise entry and exit points. Indicators like MACD, KD, Bollinger Bands can identify trends, and support/resistance levels assist in setting buy and sell points.

Step 4: Strictly implement stop-loss and take-profit
Don’t dream of buying at the lowest or selling at the highest. Set reasonable risk-reward ratios; capturing the main swing profits is already a success.

Core advantages of swing trading

Compared to other trading methods, swing trading has obvious advantages:

• No need to monitor the market constantly: Cycles last weeks to months, allowing investors to continue normal work and life
• Relatively controllable risk: Based on clear macro logic rather than short-term emotional fluctuations
• Suitable for ordinary investors: No need for complex technical skills or large capital; understanding cycle patterns is enough to participate
• Higher success rate: As long as the logic is clear, the probability of success often exceeds 50%

Conclusion

Swing trading is a rational, systematic investment approach emphasizing following the trend rather than fighting against it. Mastering macro cycles, selecting quality targets, combining technical analysis, and strict risk management are four indispensable steps. For most investors, rather than pursuing extreme returns, steadily capturing swing profits and accumulating wealth over time is a wiser choice.