Swing Trading Practical Guide: How to Achieve Steady Profits in Mid-term Trends

Slow stock accumulation yields, day trading risks are too high, and many investors are seeking a middle ground. Swing trading has emerged as a popular strategy among retail investors. This investment approach leverages market fluctuations over several weeks to months to generate profits, without needing to monitor the market all day, while capturing key market ups and downs.

The Core Logic of Swing Trading

The essence of swing trading is “going with the trend.” It targets market events that take longer to ferment—such as monetary policy adjustments, industry innovations, supply chain crises, etc.—whose impacts often last more than half a year. Compared to the split-second race of short-term day trading, swing trading provides investors with ample observation windows and avoids the long wait of long-term holding.

Successful swing trading does not pursue huge profits; a stable 30-50% return is already excellent. The key lies in mastering the rhythm of entry and exit, rather than perfectly predicting market tops and bottoms.

Four Steps to Successful Swing Trading

Step 1: Track Long-term Market Events

Pay daily attention to news on economic policies, industry trends, geopolitical issues, etc., to build awareness of the macro environment. Some events are short-lived noise, while others evolve into sustained trends lasting months. For example, after the Federal Reserve’s rate hike cycle begins, currencies, commodities, stocks, and other asset classes will react in a chain, creating the best stage for swing trading.

Step 2: Select Trend-Characteristic Assets

Not all assets are suitable for swing trading. Major indices, industry indices, exchange rates, gold, and cryptocurrencies—these macro assets tend to have strong trends and form clear upward or downward channels. In contrast, individual stocks are more affected by single events or manipulation by major players, resulting in volatile and unpredictable movements.

If sticking to swing trading individual stocks, focus on large-cap, blue-chip stocks—Apple, Microsoft, TSMC, and other industry leaders. These represent the overall industry health; even if the industry declines, their trend won’t reverse due to a single order change.

Step 3: Confirm with Both Technical and Fundamental Analysis

Fundamentals determine the long-term direction, while technical analysis helps grasp the medium-term rhythm. Use indicators like MACD, KD, Bollinger Bands to assess trend strength, and support/resistance levels to time entries and exits. Also, pay attention to market psychology—most investors are reluctant to cut losses, and moving averages reflect the average cost of the crowd’s holdings. When prices break through long-term moving averages and hit new highs, it often signals a new influx of capital.

Step 4: Set Risk Boundaries

Establish reasonable stop-loss and take-profit points. Never gamble recklessly. Being able to steadily capture the main wave’s profits already makes you a successful swing trader.

Five Major Swing Trading Strategies

Monetary Policy and Exchange Rate Movements

The Fed’s decisions to raise or lower interest rates stem from long-term issues like inflation and employment, and once started, tend to last half a year to a year. For example, in 2022, the Fed began rate hikes in March, and the US dollar index rose accordingly. Even if the increase totals 15%, investors don’t need to precisely predict the endpoint—just position for a long when the policy direction is confirmed, and close when inflation peaks are signaled. This approach has a very high win rate because the fundamental logic is clear.

Pursuit of New Technology Industries

In the second half of 2022, when ChatGPT was launched, the market immediately recognized its potential to change search, content creation, and multiple industries. Regardless of the final outcome, capital will continue to chase related sectors, forming upward waves lasting months or longer. At this point, it’s safer to buy ETFs or indices of the entire industry rather than individual stocks.

The exit can be set when prices break previous highs or before key earnings reports. Don’t be greedy to eat the whole fish; leave some profits for later entrants. That’s the discipline of swing trading.

Supply Gaps in Long-Production Cycle Products

Agricultural products, chips, and other goods with long production cycles, when facing supply shortages, are hard to resolve quickly by increasing capacity. Food crises caused by the Russia-Ukraine war, chip shortages triggered by the pandemic, are golden opportunities for swing trading. Adjust holding periods based on product cycles—agricultural products may show effects in weeks, while chip shortages could last 1-2 years.

Conversely, commodities like masks and oil, which can be quickly adjusted through capacity or policy, tend to shift market sentiment too fast for swing trading and are better suited for short-term strategies.

Liquidity Easing and Asset Preservation

Global GDP growth is limited, but governments can print money endlessly. During the COVID-19 pandemic, the US injected $4.5 trillion, doubling dollar supply in the short term, while real assets couldn’t keep pace, leading to currency depreciation. At this time, **assets with fixed or steadily increasing total supply—like gold and Bitcoin—**become safe havens, suitable for long positions during QE (quantitative easing) and closing during QT (quantitative tightening). Scarce assets like prime real estate follow the same logic.

Strong Technical Breakouts

When a long-term narrow-range trading asset suddenly gets aggressively bought at higher prices, it often signals the start of a new trend. The market will seek fundamental reasons for the rise, attracting more participants. This “chasing high and selling low” operation may seem counterintuitive but is core to swing trading—once the trend is established, riding the wave offers the highest safety margin.

Leverage Tools: Amplify Swing Trading Profits

Traditional stock or forex trading, even with correct judgment, often has limited gains (e.g., forex may only fluctuate 10%). Here, CFD (Contract for Difference) offers an elegant solution.

CFDs do not require owning the underlying asset; they only trade on price movements. Advantages include:

• Two-way trading: long or short
• Flexible leverage: typically 10x to 200x
• Limited risk: maximum loss is the initial capital, no debt incurred
• High capital efficiency: small funds can participate in large moves

For example, from early 2022 to October, the US dollar appreciated by 15%. Using 10x leverage on CFDs, profits could reach 150%. This macro-based swing approach has high win rates and clear risks, making it ideal for leverage.

Summary

Swing trading is a replicable system. It requires macro insight to identify long-term fermenting market events, and discipline to follow technical and fundamental rules for entry and exit, without being misled by short-term noise. Instead of fighting the market, it’s better to follow the trend and let the trend create wealth for you. That’s why swing trading has become the preferred path for many rational investors.