Swing Trading ETFs: The Complete Guide

If you’ve explored our blog, you’ve gained access to our in-depth articles on topics like swing trading options, short selling ETFs, and other investment strategies that are not the normal “buy a stock low and sell it high” advice you hear in this industry. And today, we’re going to talk about another obscure investment strategy you can try if you’re an active, savvy investor: swing trading ETFs.

These funds can present a great opportunity for swing trading – and soon, you’ll know exactly how to uncover ETFs to swing trade and earn consistent profits. In this complete guide, we’ll touch on the strategy behind ETF swing trading so you can try it yourself. Moreover, we’ll provide you with the tools you need to safely execute your strategy. First, though, we want to provide a brief introduction to swing trading and ETFs in general.

A Brief Overview of Swing Trading & ETFs

If you’re already familiar with swing trading and ETFs separately, you can skip ahead to the next section. Here, we’re going to provide a brief overview of both the swing trading style and ETFs individually – then, we’ll get into how they work together. First things first – what is swing trading?

What is Swing Trading?

What is swing trading and how does it work? This is an investment strategy that attempts to capture short-term gains in a stock (or any asset) over the course of a few days to a few weeks at most. Swing traders will hold their position overnight – and sometimes over the weekend. But the idea is to get in and out over the course of short-term price swings. Along a stock’s overall trajectory, there are temporary rises and falls. Swing traders capitalize on these, earning a profit no matter what the overall trend of a stock’s price is.

This strategy can be used on any asset including stocks, options, commodities, Forex, cryptocurrency, and more. If you want to learn more, our beginner’s guide to swing trading is a great resource.

What are ETFs?

An ETF – or Exchange Traded Fund – is a fund traded on a stock exchange just like a regular stock. ETFs are a type of mutual fund – a pool of money managed by financial experts and professionals – that trade like stocks. They often track an index, specific sector, or commodity. And they can be bought or sold throughout the day on major exchanges.

ETFs have become increasingly popular in recent years as investors have sought new ways to invest their money. And because they’re traded like stocks, they present opportunities for active investors who want to swing trade.

Now – knowing the basics of swing trading and ETFs, how does this investment style pair with this investment vehicle? Keep reading to find out.

Is ETF Swing Trading Possible? And More Importantly, Worth it?

Yes, ETF swing trading is definitely possible – and it can be quite profitable if done correctly. However, there are a few things you need to take into consideration before deciding if this investment strategy is right for you.

First and foremost, you need to have a firm understanding of what an ETF actually is. If you don’t want to put in the effort to learn more about ETFs and how they work, swing trading ETFs probably won’t be a great fit for you. This strategy requires active involvement and frequent trades – so you need to be comfortable with that level of activity. While you certainly won’t be stuck in front of a screen as much as day traders are, you will need to spend a bit of time every day looking over your positions and uncovering new opportunities.

You also need to have enough capital to make swing trading worthwhile. Remember: the goal here is to earn small profits on each trade which will add up over time. So, if you don’t have enough money to make significant gains on each trade, it’s not worth your while. With that said, getting started on swing trading with a small account isn’t the end of the world – and can be a good idea for some beginner traders.

The main reason investors like swing trading ETFs is the liquidity they offer. So many investors actively participate in the ETF market and this prevents too much volatility from occurring. Furthermore, ETFs are incredibly safe as they’re already diversified investment vehicles themselves. While these funds are typically used as long-term investments – sometimes for retirement – an opportunity exists to earn profits in the here and now through swing trading. We’ll explain how below. 

Swing Trading ETFs: How it Works

Now comes the fun part – actually learning how swing trading ETFs works. The strategies you’ll use for uncovering opportunities, identifying entry and exit points, and executing your trading plan aren’t much different from other strategies. Let’s start with explaining how to pick an ETF for swing trading – as that’s where it all begins.

Picking the Right ETFs for Swing Trading

With over 1,600 different ETFs currently on the market, you have no shortage of options as an ETF swing trader. So – how do you choose which individual ETF’s are the best opportunity on any given day? If you have VectorVest’s desktop or mobile stock advisory, it’s super simple – we can practically tell you what to buy, when to buy it, and when to sell it. Otherwise, you’ll need to do some screening and analysis. Analyzing an ETF is pretty similar to analyzing a stock. Here are a few things to look for when evaluating an ETF for swing trading:

• Good trading volume so you can enter/exit with ease. You don’t want to get stuck waiting for your order to process and miss your opportunity. Timing is everything for swing traders.
• High price activity. If the ETF is stagnant with no price movement, how are you going to capitalize on short-term price swings?

Now – how do you go about finding ETFs that meet these criteria? You can create scanners based on your preferred swing trading indicators. Use momentum indicators to bring in ETFs that are showing some sort of trend. From there, you can conduct further technical analysis to determine the strength and magnitude of that trend. Your goal is to find a window of opportunity where you can ride a short-term price swing over the course of a day or two – or in some cases, as long as a couple of weeks. This is easier said than done. But, there are tools to help you uncover and validate your ETF picks. We’ll cover those later on. First – let’s talk about entering and exiting your position to earn profit.

Time Your Entry & Exit to Make a Profit

Once you’ve found and validated an ETF, you can enter your position and wait for your exit. While you will likely manually monitor the position, you can use stop losses and take profit orders to automate the exit. When the ETF reaches your profit target, an order will automatically execute to close all (or some) of your shares. Or, if your position doesn’t work how you’d hoped and it starts trending the wrong decision, your stop loss will fire and close your position – keeping your losses minimal.

You can even use a trailing stop strategy – as the ETF price rises and you secure more and more profits, you can increase your stop loss. This way, you can lock in profits further up in case of a reversal.

One question many new ETF swing traders ask is – how much profit should I look for per trade? What should my goals be? Unfortunately, that is not a question we can answer for you. Your goals will be dependent on your unique circumstances and risk tolerance. Are you looking to have some fun with this investment strategy or are you hoping to earn supplemental (or even full-time) income? Are you risk-averse or are you comfortable waiting a bit longer to squeeze out a few extra percentage points of profit? Before you even deposit cash into your investment account you should have an understanding of what your goals are as an investor.

From there, you will have a better idea of what types of opportunities suit your style – and how you should go about finding entries and exits. Calculating price targets is much easier if you know what kind of profits you deem a “success” and what kind of losses you can stomach.

Want to Effortlessly Swing Trade ETFs at a High Rate of Success?

ETF swing trading is a fun, exciting way to earn short-term income in a less traditional investment style. And now that you know the ins and outs of getting started, it’s time to start looking for opportunities. But – what if you could find opportunities for swing trading ETFs on autopilot? With VectorVest, you don’t need to go out and find opportunities. We bring them to you. Our pre-built searches feature an ETF tab with the hottest picks at any given time. Just wake up, pull up our picks, and validate each one through simple analysis.

Better yet, we’ve simplified analysis by boiling down fundamental and technical indicators into three simple ratings: relative value, relative safety, and relative timing. All three ratings are plotted on a simple, 0.00-2.00 scale – 1.00 being the average. Pick the ETF with the highest overall VST and win more trades! Our system has a proven track record of outperforming the market average. With a clear buy, sell, or hold recommendation for any given ETF at any given time, you don’t ever have to wonder where your entry or exit point should be. No more guesswork, no more emotion clouding your judgment. See how simple swing trading ETFs can be with the VectorVest stock market analysis software today!

Final Thoughts on Swing Trading ETFs

As you can see, swing trading ETFs isn’t just possible – it can be a great opportunity through this market’s liquidity and diversification characteristics. And now that you know how to get started with ETF swing trading, there is just one thing left to do – get started yourself! With our complete guide and our ETF forecasting tools, you can enjoy a high rate of success with minimal effort required. Want to see how our software works before taking a chance? Get a free stock analysis here.