December 28, 2011 by B.M. Davis

The recent market action has not been kind to long term investors with prices going up and mostly right back down again. But to the swing trader this market volatility has really been nice to trade. Long term holders have seen little increase or worse in their portfolios while the swing trader has been able to take advantage of the ups and downs the market has given us.

Here at Candlestick Trading for Maximum Profits we have been able to take advantage of these price swings to profit both long and short. Candlesticks, coupled with our unique trading system, have really been successful trading these market moves. While candlestick reversal patterns are a great tool to find changes in trends for the longer term trader to ride out they really shine when used to swing trade.

What is Swing Trading?

Swing trading is anticipating a move either after a breakout or a reversal pattern that forms at support or resistance and staying with the stock until it gets to the next level of support or resistance. It’s a shorter term trading technique that takes smaller profits than riding a trend but these profits add up quickly. Coupled with an exit strategy that really limits losses, swing trading allows the trader to maximize their profits.

With present market conditions the long term, buy and hold trader might be lucky to realize a profit of 10% in six months time as their stocks go through their periods of ups and downs. The swing trader however takes advantage of these price swings by entering and exiting with each move and taking the profits.

Candlestick Patterns to Swing Trade

My personal favorite candlestick patterns to use while swing trading long, which is mostly how I trade, are the bullish engulfing and morning star patterns that form at points of support. High volume doji’s and hammers at support can also be profitable but confirmation is needed for these candles with future price action.

On the short side I like to find a bearish engulfing, evening star or piercing pattern at resistance. Again, high volume doji’s and hammers at resistance can also give an early warning of a drop in price but confirmation is necessary. If you don’t trade stocks short candlesticks can also give you accurate exit signals for your long trades by paying attention to the same.

The Secret to Profitable Swing Trading

I and many of my students employ these candlestick swing trading techniques successfully in all market conditions. The secret is to follow the market. There is an old saying among traders that goes; “A rising tide lifts all boats”. This is another way of saying that if the market is going up then so will most stocks and vice versa. Watch the broader markets as you trade. If you stay in step with the price action of the broader markets then your swing trading will be much more profitable.

While candlesticks can and are used by profitable longer term traders the real magic comes while swing trading. If you are a swing trader try using candlestick charts to analyze your potential trades. Once candlesticks are mastered I think you’ll find that they’re not only easier but much more profitable also.