Swing trade patterns are powerful trading tools, but most traders struggle to understand the proper entry and exit points for trading chart patterns. However, if you trade market swings using chart patterns, RSI, volume indicators, and moving averages, you can make 60% or more.
Swing trading is a prominent trading method in the financial markets in which traders seek to profit from price swings in a security, typically on a higher timeframe such as the daily chart.
In this post, we will look at some of the most efficient chart patterns for swing trading that you may use to make money.
What Are Swing Trade Patterns?
A swing trade pattern is a chart formation used by swing traders to locate and assess prospective opportunities in the stock market. These patterns assist swing traders in readily finding entry points where they can buy stocks and ride a price swing up or down. A swing trade pattern is also used to identify exit opportunities where traders can sell for a profit or limit losses and trade Fractional Stocks.
Along with timing your entry and exit points, swing trade patterns may help you judge whether there is even enough of an opportunity in a certain company, and understanding how to exploit these trade patterns to achieve regular swing trading gains is critical.
Furthermore, the finest trade patterns provide information on predicted price movements as well as other characteristics like as volume spikes and directional momentum, which signal if a company is likely to maintain its present trend and provide a profit opportunity.
Swing trade patterns exist in a variety of shapes and sizes, ranging from bullish reversals, which mark the beginning of an uptrend, to bearish flags, which warn of negative momentum.
Best Swing Trade Patterns
Chart patterns are important in swing trading because they allow a trader to forecast the market’s future action and find the best stocks for swing trading, which will either continue or reverse, by detecting chart patterns at swing points. Chart patterns for swing trading can be employed for stocks, currencies, commodities, and cryptocurrencies, depending on the market in which you choose to trade.
To enhance their earnings, many traders employ trade patterns as an indicator, support, and resistance. Here are some of the best swing trading patterns to consider in the long run.
1. Head and Shoulders chart pattern
Head and Shoulders is a bearish reversal chart pattern composed of a shoulder indicating high, a head indicating higher high, and another shoulder indicating lower high. A neckline is formed by connecting the two lowest points of the head, where a breakout of the head and shoulder’s neckline confirms a bearish reversal movement and provides a short-selling opportunity.
Before opening a short trade, you can also wait for a price pullback that is a retest of the broken neckline, and the stop loss order should be set above the head or the recent lower high. The Head and Shoulders chart pattern’s price target is derived by calculating the distance between the pattern’s head and neckline.
2. Inverse Head and Shoulders chart pattern
In a downtrend, the price will form a low that represents a shoulder, a lower low will represent an inverted head, a higher low will represent another shoulder, and a neckline can be formed by joining the highest points on the head. This pattern is known as an inverse head and shoulders.
A breakout of the neckline in this chart pattern signals a bullish reversal and a buying opportunity, and if the price retests the broken neckline, a pullback entry can be executed. The stop loss is placed below the head or higher low, indicating a pattern shoulder, and the price target is calculated by measuring the low point of the head to the neckline.
3. Double Top chart pattern
A Double Top is a bearish reversal swing trade pattern generated when the price forms nearly two similar highs, indicating that the bullish trend is losing strength. In the Double Top chart pattern, the lowest point of the two tops can be used as a neckline or support level.
When the Double Top chart pattern’s neckline is broken, you can place a short entry order or wait for the price to retest the neckline before establishing a short position. A stop loss can also be placed above the top of the Double Top chart pattern, and the price target is defined by the length of the double-top formation.
4. Double Bottom chart pattern
A double-bottom chart pattern is the inverse of a double-top pattern, which suggests a bullish reversal and is formed when the price makes nearly two equal lows, indicating bearish momentum weakness. In addition, the highest swing point between the two bottoms of the double bottom chart pattern can be utilized to create a resistance neckline.
The breakout of the neckline indicates a bullish reversal and can be used as a buying opportunity; retesting the broken neckline can also signify an ideal long entry. Stop loss orders can be put below the double Bottom chart pattern, and the price objective can be set at the same height as the double Bottom formation’s length.
5. Ascending Triangle chart pattern
In an uptrend, an ascending triangle chart pattern forms when a horizontal resistance level and a slope of higher lows are produced. The ascending pattern suggests that buyers are exerting pressure on the resistance level, implying that a breakout is on the way.
Soon after the candle closes above the resistance level, you can initiate a long position, and a pullback entry on a broken resistance level can also be used as a buying opportunity. The stop loss order can be set below the most recent swing low of the ascending pattern, and the price target can be calculated using the length of the pattern’s back.
6. Descending Triangle chart pattern
A descending triangle chart pattern is the inverse of an ascending triangle and consists of a horizontal support level and a steep slope of lower highs. The support level suggests that selling pressure is increasing and that a breakout is imminent, but a support level breached with volume indicates that the drop will continue.
When the candlestick closes below the support level, a short entry may be made, and a stop loss can be placed at the chart pattern’s recent swing high point.
7. Symmetrical Triangle chart pattern
A symmetrical triangle chart pattern is generated when the slopes of lower highs and higher lows cover to form a triangle, and this sort of chart pattern implies consolidation with an impending breakout as the two slopes approach one another. Because of the bidirectional character of this stock pattern, a breakout with volume on either side indicates more market activity.
When the resistance level in the symmetrical chart pattern is broken, a long entry with a stop loss below the pattern’s most recent higher low would be put. Similarly, when the stop loss order is put above the pattern’s most recent lower high, a support level breach indicates a short selling opportunity.
These swing trade patterns are only a few of the top price movement indicators that can help swing traders make good deals. Trading through swing trade patterns, on the other hand, is difficult since it takes time and devotion to properly examine charts and timing inputs and exits to perfection. Furthermore, while these trade patterns will assist you in identifying prospective chances and timing your entry and exit, they are a bit technical and time-consuming to employ.
1. Which pattern is the most suitable for swing trading?
Swing trading patterns include ascending and descending triangle formations, range consolidations, head and shoulders patterns, and double top and double bottom patterns, among others.
2. Is a one-hour timeframe suitable for swing trading?
Swing trading is often performed on longer timescales, such as daily and weekly charts. However, traders using different time frame trading strategies could leverage the 1-hour period to enter daily swing positions.
3. Is a 4-hour chart appropriate for swing trading?
Many traders would enter daily swing positions using the 4-hour chart. Because stock market cash sessions are typically open for 8 hours, the 4-hour chart contains two bars for the day, whereas the FX market has six four-hour bars.