Top 3 Stocks for Novice Swing Traders

Swing traders buy a stock for a few days, then sell it for a profit after the price has moved higher. That's the goal anyway. If this interests you, the best way to learn quickly is by picking the right stocks to buy in the first place. Look first at large-cap stocks because they have numerous shares changing hands at any given minute, (called liquidity), making them easy to buy and sell quickly. 

Key Takeaways

  • Swing traders typically try to buy a stock, hold it for two or three days, then sell it at a profit.
  • Not all stocks are suitable candidates for swing trading.
  • The best candidates have sufficient liquidity and steady price action.
  • Meta (formerly Facebook), Apple, and Microsoft are suitable stocks for swing trading in certain market conditions.
  • To see if swing trading makes sense for you, consider practicing trading before risking real money.

Picking Swing Stocks

When choosing a stock to swing trade, it's helpful to find relatively calm stocks, meaning they don't exhibit excessive price moves called volatility. Ideally, stocks trending slightly up or down, with steady price action, but without too much volatility are best. The goal of swing trading is to make a living instead of making a killing on one trade. 

Below are three stocks for their liquidity and steady price action. It's helpful to follow these stocks and make paper trades before moving to live trades with real money. It's essential to learn how to identify the signs of when to buy and when to sell, but note that market conditions often change, and an approach that worked before might not necessarily make profits in the future.

Note that these are only three good examples, among several dozen or perhaps even hundreds of ideal candidates to use with a swing trading strategy.

Facebook

Meta (FB), formerly Facebook, is a great stock for learning to trade trendlines. When you look at the stock chart, you can see that as the stock zigzags upward, the low points in the pattern all line up. You can draw an approximate line across these low points. That is the lower trend line. Every time the stock hits that line, it can go back up.

What makes this stock especially good to start with is that you can use a moving average line, such as the 50-day moving average, as the bottom trend line. Similarly, you can draw a trendline across the highs that the stock price hits.

When Facebook reaches that upper trend line, it tends to drop back down to its bottom trend line. Note that these trend lines are approximate. You have to get the knack for knowing when the stock price is about to turn, rather than count on strict adherence to the drawn trend lines.

Approximately 16 million shares are bought and sold daily in April 2020, so it is easy for you to find buyers and sellers. This means the stock is liquid, and you can easily sell out of your position if the price begins to drop.

Microsoft Corp.

You can trade Microsoft (MSFT) stock much like you would trade Meta. Once again, the 50-day moving average can serve as a rough guide for the lower trend line. The upper trendline can be a bit ragged, which can help you learn the feel for when the stock may rise and fall.

The best stocks for swing trading might be a lot different in the future, as market conditions are always changing.

Still, the stock is trending regularly enough that you can count on it to continue its pattern for a while and learn to time your buy and sell points regularly. Draw a line across the highs to determine the approximate value at which you should sell. Note that the longer trendline, the more likely it is that the line is accurate. Roughly 24 million shares are bought and sold daily as of April 2020.

Apple Inc.

The stock of Apple Inc. (AAPL) will require a little more finesse than MSFT and FB. Apple has many product launches and announcements that affect its stock price, which can add an extra element to your swing trading. Watch for those announcements and monitor how the stock price responds. You can watch the technical indicators on the chart and combine them with the fundamentals of the company to help time your trades. Over 24 million shares are bought and sold daily as of April 2020.

The Bottom Line

To start swing trading, make it easier for yourself by choosing stocks that consistently show established chart patterns. Typically, large-cap names with sufficient liquidity—like MSFT, FB, and AAPL—are ideal places to start. Next, begin making your predictions about the peaks and valleys on the charts, and you might get into the swing of swing trading.

Article Sources

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  1. Yahoo Finance. "Facebook, Inc. (FB)." Accessed April 23, 2020.

  2. NASDAQ. "FB: Facebook, Inc. Class A Common Stock." Accessed April 23, 2020.

  3. NASDAQ. "MSFT: Microsoft Corporation Common Stock." Accessed April 23, 2020.

  4. NASDAQ. "AAPL: Apple Inc. Common Stock." Accessed April 23, 2020.