Swing Trading – A Starter Guide

Swing Trading - A Starter Guide

Many of us do not have the time to trade intraday or prefer not to do so. Swing trading may be an option for people who do not want to do day trading. Swing trading focuses on trading over a short-term period (say a few days to a week or even 1-2 months). Here, a trader holds positions for more than a day. Usually, the target profit in swing trading is 10 to 20%.

Swing traders mainly focus on stocks that are highly liquid and heavily traded on the exchanges and often swing between widely defined high and low points. This gives advantage to the trader to ride the wave in a particular direction and make a profit.

Let us see some Pros and Cons of Swing Trading.


1. Low time commitment: Day trading can be hectic, especially when it requires the traders to actively participate during market hours. (You can solve this problem with automated trading. Read more.) In swing trading, a trader can keep their position open for over a day to a few weeks and does not need to be a full-time trader.

2. Flexibility: One of the most significant advantages of swing trading is that a swing trader can square off positions according to their convenience, whereas a day trader needs to square off their positions on the same day.

3. Profitability: Swing trading can be profitable with proper risk management.


1. Exposure to overnight and weekend price gaps: This is the most significant disadvantage of swing trading. Suppose any negative news or poor quarterly earnings of a company emerge after the closing of the market or on the weekend, the swing trader cannot exit their position and may face substantial price gaps the next day or week.

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The only way to minimize the risk linked with the price gaps is to trade with smaller quantities or use a tool like PHI 1 that allows you to automate your strategies, such that trades are executed when certain criteria are met.

2. Locking of Capital

An intraday trader has the advantage of buying and selling the stock many times, and thus, they can rotate their capital to earn good profits. However, in with swing traders, their capital gets locked into a single trade or a few trades and does not free up until the trades are exited

3. Unsuitable for Extreme Market Scenarios: In full-fledged bull and bear markets, swing trading can be tough. This is because markets are highly volatile and may not move as desired by the trader.

Now, let us understand the MACD Crossover, an efficient strategy for swing trading.


Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a stock’s price. Primarily, the 26-period exponential moving average (EMA) is subtracted from the 12-period EMA to get MACD.

MACD=12 Period EMA – 26 Period EMA


After this simple calculation, we get the MACD line. Further, the nine-day EMA of the MACD is calculated, which is called the ‘signal line’.

MACD is presented using a histogram that plots the difference between the MACD line and the signal line. When the MACD line is above the signal line, the histogram will be on the top of MACD’s baseline.

If MACD is below its signal line, the histogram will also be below the MACD’s baseline. Swing traders use this histogram to analyze when the bullish or bearish momentum is huge.

READ :   Getting Started with Options Backtesting on PHI 1
PHI 1 Swing Trading MACD Guide
Source: Investopedia

We can interpret MACD indicators in many ways: crossovers, divergences, and rapid rises or falls. However, MACD crossover is one of the commonly used techniques for swing trading.

Let us understand this technique.

The Buy/Sell signal forms when the MACD line and signal line cross each other.

A bullish trend is indicated when the MACD line crosses above the signal line. This is the right time to enter a trade.

Later, when the MACD line touches the signal line and crosses below it, it is the ideal time to exit the position and book profits.

Let us illustrate how you can do this on PHI 1

Shown below is the chart of CIPLA Limited with a time frame of 1 day. The buy signal is generated when the MACD line (blue colour) crosses above the signal line (red colour). The trader may enter at this price.

In the later part of the chart, traders could exit the trade when the MACD line reverses and crosses below the signal line.


You can create this strategy without any code. PHI 1’s form-based code creator allows you to create this using a drop-down mechanism.

Check out our webinar on how to create a MACD strategy on PHI1.

Whether you are a day trader or swing trader, PHI 1 can help you elevate your trading. As an intraday trader, you need not stay stuck to your screen.

PHI 1 offers screeners, charts, strategy creators, testing, and deployment  – all within a single, unified platform.

Try PHI 1 for free!

One thought on “Swing Trading – A Starter Guide

  1. 1. What should be the look back period of the chart and what should be the interval?

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