While we were discussing the different styles of trading, in continuation to the same we will discuss Swing trading in today’s article. Firstly we will pick what is swing trading followed by How to do Swing Trading in Zerodha?
Swing Trading in Zerodha
As the name suggests, Swing means swaying back and forth with the movement. Similarly, traders use this technique by making profits from market ups and downs. This style is suitable for making short-term gains which could last from a minimum of 1 day to several weeks. Thereby, traders use technical analysis as a base for understanding ttod pattern of the stock to predict the future movement of that stock. While analyzing a certain stock you realize this particular stock can give you bumper returns in the future then it is better to utilize the fundamental analysis to keep that stock for a longer duration.
Swing trading becomes profitable and provides a good perspective to learn about both short-term and long-term market movements if losses are kept to acceptable levels using stop-loss techniques. The disadvantage of swing trading is that you must constantly work hard to manage trades, which means you may miss out on potential profits due to market movements.
The Strategy of Swing Trading
Before you get into Swing Trading, it’s important to understand the strategy that you need to devise for winning this style. This entails looking for trade setups that tend to result in predictable price movements for the asset. There is no guarantee that every time the strategy will work. However, it is not necessary to win whenever the risk/reward ratio is favorable. The more favorable a trading strategy’s risk/reward ratio, the fewer times it needs to win in order to generate an overall profit over many trades.
Instead of aiming for 25% to 30% profits on the majority of your stocks, aim for 10%, or even 5% in tougher markets. These may not appear to be the life-changing rewards typically sought in the stock market, but this is where the time factor comes into play.
Of course, don’t take many losses hence little gains can only result in overall portfolio growth. Instead of the standard 7% to 8% stop loss, take losses at a maximum of 3% to 4%. This will keep you at a 3-to-1 profit-to-loss ratio, which is a good portfolio management rule. It’s a critical component of the entire system because a large loss can quickly wipe off all the gains.
How to do Swing Trading in Zerodha?
Time needed: 1 minute
Here are the simple steps involved in Swing Trading in Zerodha. Then, let’s begin!
- Open the Zerodha App on your device
To start with trading you can use Kite login either on mobile or on desktop as per your convenience.
Key in your Username, Password followed by a Pin.
- Implement the Devised Strategy
Basis the swing strategy, you need to pick the stock which you think can give you desired results over a week. Search for the stock in the search bar option or add it to the watchlist for monitoring the prices. Let’s say basis on my technical analysis, I can forecast there will be price escalation for the Asian paint stock for the next few days.
- Select the stock and Click on the Buy option
Once you have selected the stock you can click on the Buy option and fill in your order details. It’s better to do overnight trading as you will keep this stock for a certain day. Enter the quantity choose long-term and limit the loss by entering the price at which you like to buy this stock. Further, click on swipe to buy option.
- Order Placed
Once you swipe Buy, depending upon the limit price, it will send the order to exchange for execution. Your placed order will be completed once it gets executed at the limit price you set and you can view it in my order section.
Similarly, you can sell this stock when it reaches desired price level as per devised strategy on Zerodha.
The trading channel width can be used by a trader to gauge performance. A 100% performance on a transaction would be achieved by buying at the bottom channel line and selling at the top channel line. A trader would perform at 50% if they managed to capture half of the channel. The objective is to steadily raise the average winning trade performance percentage.
The key is to create a system that works for you, use it consistently, follow clear money management guidelines, and keep thorough records so you can monitor your development as an investor.