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How to select stocks for Swing Trading?

In this blog I will delve into a topic that has been a frequent query on my social media channels: How-to select stocks for swing trading?

What is Swing Trading?

Swing trading, in essence, is about capitalizing on the fluctuations in stock prices – buying low and selling high. Stock prices rarely move in a linear fashion; they oscillate in waves or swings. The goal of swing trading is to ride these upward swings, optimizing your strategy to generate alpha – outperforming both the market returns and the stock's performance itself. However, this is a very idealistic definition. The analysis and execution skills required to achieve the stated results can take years even decades to master.

The Five key aspects of Successful Swing Trading

The recipe of successful swing trading requires five key ingredients:

  1. Selecting the Right Stock: This involves meticulous research and analysis to identify stocks with promising potential.

  2. Entering at the Right Time: Entering the stock at the right time is crucial for maximizing profits and minimizing risks. This requires strategic execution with the use of price alerts made on the basis on keen observations and standing orders like GTT

  3. Allocation the Right amount of Capital: Allocating the right amount of capital to each trade ensures optimal portfolio management. Both under allocation and over allocation affect the stock's impact on the overall portfolio

  4. Exiting at the Right Time: Unrealized profit should also be protected like the capital invested. Majority people see profits but fail to realize them. The skill of entering and exiting the stock at the right time takes immense practice and patience.

  5. Managing the Risk at all times: Implementing effective risk management strategies, such as setting stop-loss orders, trailing the stop-loss effectively, safeguards your investments and unrealized profits. The art of setting stop-loss too requires immense practice and for every different stock based on its 'personality' and stage of the unfolding underlying trend.

Selecting the Right Stock

With over 6,000 stocks in the market, narrowing down to a small and management watchlist is essential. Here's how you can do it effectively:

  1. Focus on Liquidity: opt for stocks with sufficient trading volume and liquidity to facilitate smooth entry and exit from positions at all times.

  2. Understand the Stock's Personality: Different stocks exhibit varying behaviors – from super trenders to momentum movers to slow movers. Identify stocks whose personality aligns with your trading style and skillsets.

  3. Consider Fundamental Quality: Only adopt stocks with strong fundamentals, robust revenue growth, healthy margins, and favorable industry and economic conditions in your watchlist.

Once the watchlist of stocks is determined, screeners can be used to identify stocks which are potentially at a favorable entry level.

I prefer to use Chartink.in for this purpose. Here is a screenshot of the screener I prefer to run every time the Nifty50 falls about 200-300 from the recent top.

This is however only the first step in the process of Selecting the Right Stock for Swing Trading. All the outcomes of the scanner of the said day and days to follow are required to be thoroughly analyzed from the following lenses:

  1. Is the underlying trend of the stock strong?

  2. Did the stock come into the filter during a trend correction or a dip?

  3. Are the momentum, price activity and volume indications healthy at the time of monitoring the stock or red flags can be noted? When a stock shows red flag on any of the three parameters on any timeframes (15m, 75m, Daily or weekly) it needs to be eliminated.

There is years of insights and skills involved in answering the above questions. But just because it has taken me years to answer them does not mean it should take you years too. Learn from my mistakes and draw from my insights. I have condensed by 12 years learnings in Swing Training in the Advance Technical Analysis Training Program which aims to impart you all the knowledge and skills I have honed over the last 12 years in structured 24 sessions spread over 6 months with the option to repeat the entire training and ask any questions at any time.

If you're interested in real-time updates and trade recommendations (subscription based), join my Telegram channel: https://t.me/tradewithkavita 

Watch past webinars for more technical analysis and swing trading knowledge sharing (FREE) https://www.youtube.com/@EXP_Invest 

For those new to the market or considering investment, now is an opportune time to begin your journey with expert guidance, check out the services page for our offerings.

Thank you for reading!

-Kavita Agrawal CMT CFA


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