Introduction: Learn the Art of Swing Trading #2

Tip #2. Analyze swing points

Swing points (some call them "pivot points") are those areas on a stock chart where important short term reversals take place. But not all swing points are created equal. If fact, your decision to buy a pullback will depend upon the prior swing point. Here is an example:

Look at the area that I have highlighted in green. You may have considered buying this pullback. Now look at the prior swing point high (yellow highlighted). There are two problems with buying this pullback. First, there isn't much room to work with! The distance between the pullback and the prior high is too small. You need more room to run so that you can at least get your stop to break even.

The second problem is this: The prior high (yellow area) is composed of a cluster of candles. This is a strong resistance area! So, it will be very difficult for a stock to break through this area. Instead, look to trade pullbacks where the prior high is only composed of one or two candles.