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ETFs, known as exchange traded funds, are a popular choice amongst swing traders. Today we will share the basics on how to swing trade ETFs for maximum profit potential.
Understanding ETFs and Swing Trading
An ETF is traded just like a stock on the market and holds assets such as stocks, commodities, or bonds. They have variable price changes throughout the trading day as they are bought and sold, just like stocks do.
There are a few advantages to trading ETFs, such as being able to diversify, the ability to sell short, and no minimum purchase requirements. They generally have lower prices, making them a good choice for investors working with little cash flow.
Swing Trading is a trading strategy in which you purchase shares and hold them for a small period of time, though this period of time is not defined as a certain absolute time period. You may hold a stock for a few days, a few weeks or even a few months, depending on the action of the stock.
The Benefits of Swing Trading ETFs
There are a number of benefits of swing trading ETFs, which make this strategy a popular choice for many investors:
- Opportunity for Gains With Less Time:Since you will likely only be holding the ETF for a few days or a few weeks depending on the market, you will likely see a return within a relatively short period of time. Unlike long term investors who may wait years to see any return on investment, you will likely see a return rather quickly.
- Free Up Capital:When you have a lot of money tied up in long term investments, you could potentially find yourself with a lack of funds to continue investing in new opportunities that come along. When you swing trade, you have the ability to adapt to the market and have capital when you need it.
Once you understand the basics of how ETFs work and how to swing trade, you are ready to understand how to swing trade ETFs.
Here is How to Swing Trade ETFs:
Step 1: Research Which Industry You Want to Invest In:
The first place to start in swing trading is learning how to find the best ETFs to swing trade. You can do this by researching various industries and sectors. For example, perhaps you want to invest in a biotechnology ETF or the automotive industry.
Step 2: Choose the ETF that Meets Your Criteria
In our article on how to pick stocks for swing trading, we cover a few indicators that you can use to formulate your swing trading strategy. For example, you may want to choose a stock which has a decent amount of volatility. What this means is the price is constantly changing and going up and down. This gives you plenty of opportunity to possibly earn a nice return. However, it is important to note you will want to choose an industrywhich ison an upward trend, otherwise if you hold the ETF too long you risk losing money.
Step 3: Use a Suitable Online Broker
Choosing the right online stock broker for swing tradingETFs is essential if you want to be profitable. Be sure to carefully research all applicable trading laws, restrictions, and regulations. You will also want to make sure the online broker charges a reasonable fee. Do your homework here and it will make your life much less complicated.
Step 4: Create an Exit Strategy
Since the whole point of swing trading is to only hold the stock for a short period time of a few days or weeks, it is essential you have a strategy to exit. There are a few strategies for this, but the common one is to have a set price in mind and exit at that point once that price is reached. Learning how to read stock charts and brushing up on candlestick patternscan help you determine a target price for the highs and lows so you know when it’s time to exit.
Step 5: Practice and Learn
One of the best things you can do in the very beginning is to practice using stock market simulation games. Track your progress, the things you learn, and develop your strategies. Keeping a journal can be very helpful.
Step 6: Implement the Plan
When you are feeling confident in what you have learned about swing trading and ETFs and you have developed your own strategy and done a suitable amount of research, you are ready to start trading!
Do you have any tips for beginner traders to share about how to swing trade ETFs? Share your thoughts in the comments below or join the discussion on our stock forums!
FAQs
Yes, ETF swing trading is definitely possible – and it can be quite profitable if done correctly. However, there are a few things you need to take into consideration before deciding if this investment strategy is right for you. First and foremost, you need to have a firm understanding of what an ETF actually is.
How do I set up TradeLocker? ›
All you need to do is enter your name and email address, then click on “Select Trading Platform” and choose TradeLocker. Select your preferred currency, leverage, and balance, and tap on “Open Demo Account”. Now you are ready to start your trading journey!
What is the best swing trade strategy? ›
As far as patterns are concerned, the ascending and descending triangles are considered to be the best. The top swing trading strategies are Fibonacci Retracement, Trend Trading, Reversal Trading, Breakout Strategy and Simple Moving Averages.
What is the best index for swing trading? ›
Abbreviated as MA, the moving average has long been considered one of the best swing trading indicators in technical analysis. You'll use it to confirm trends in price movement. Because this falls into the category of lagging indicators, you would rarely use the moving average to predict future price movement.
Can you trade ETFs all day? ›
There are no restrictions on how often you can buy and sell stocks or ETFs. You can invest as little as $1 with fractional shares, there is no minimum investment and you can execute trades throughout the day, rather than waiting for the NAV to be calculated at the end of the trading day.
Can you live off swing trading? ›
One of the main benefits of swing trading is that while it doesn't take much time, you can earn large profits for the time invested. This trading style can be anything you want it to be. If you are willing to dedicate yourself entirely to it, you can easily earn a living through swing trading alone.
Can I connect TradeLocker to TradingView? ›
Our integration with TradingView offers access to hundreds of customizable charts and custom indicators, to help you view real-time market data, track price movements across multiple assets, and make quick, accurate market decisions.
Which prop firm uses TradeLocker? ›
Which prop firms use TradeLocker? FunderPro, OspreyFX are some of the best options for traders that use TradeLocker as their trading platform.
Which brokers use TradeLocker? ›
Best Forex Brokers Offering TradeLocker
- OspreyFX - Up to 500:1 leverage.
- NextTrade - 0% Trading Commission.
- Thorfx - Accepting US Clients Up to 500:1 leverage.
The 1% rule is a key risk management strategy for swing traders, where a trader aims to limit each loss to 1% of their portfolio's value. traders have enough capital to keep trading and avoid significant losses that could wipe out their account.
George Soros - One of the most successful swing traders of all time is George Soros. Soros is a Hungarian-American billionaire investor, business magnate, philanthropist, and political activist. He is best known for his legendary trade in 1992, when he made $1 billion in a single day by short selling the British pound.
Do swing traders beat the market? ›
We've seen estimations that as many as 90% of swing traders fail to make money in the stock market – meaning they either break even or lose money. That suggests that the average swing trading success rate is somewhere around 10% – meaning 10% of swing traders actually bring in profit over the course of a year.
Which RSI is better for swing trading? ›
Some traders may prefer a shorter time period, such as a 7-day RSI, for short-term swing trading, while others may prefer a longer time period, such as a 21-day RSI, for longer-term swing trading.
What chart do swing traders use? ›
Swing trading strategies can be aided by using candlestick charts and oscillators to identify potential trades. Oscillators track momentum and help identify reversals when they begin to diverge from the existing trend.
Which chart pattern is best for swing trading? ›
Ascending Triangle Patterns
The ascending triangle pattern is a chart formation that's produced when price movements form an “L” shape. This signals that the buyers are in control and the stock is likely to swing up – making it one of the best swing trading chart patterns for predicting bullish reversals.
Can you trade ETFs at any time? ›
ETFs are traded in the markets during regular hours, just like stocks are. Mutual funds can be redeemed only at the end of a trading day. Stocks are traded during regular market hours. Some ETFs can be purchased commission-free and are cheaper than mutual funds because they do not charge marketing fees.
Can you trade ETFs like stocks? ›
Similar to a mutual fund, ETFs can provide access to a diversified mix of stocks or bonds in a single investment, but you can trade them like a stock on an exchange. In this article, we share tips to consider when buying and selling ETFs.
Can ETFs be bought and sold like stocks? ›
ETFs can be bought and sold just like stocks, while mutual funds can only be purchased at the end of each trading day. Actively managed funds tend to have higher fees and higher expense ratios due to their higher operations and trading costs.
Can ETFs be traded intraday? ›
ETFs Offer Intraday Trading
Just like individual stocks, ETF shares can be bought and sold throughout a trading session, but their structure is similar to mutual funds.
