10 Swing Trading Strategies Backtested (With Historical Performance)

Last Updated on March 10, 2023

What is the best strategy for swing trading? Is swing trading still profitable? We have summarized 10 free swing trading strategies that might help you start your trading career. The internet is flooded with anecdotal evidence about how to swing trade and how to make money. Unfortunately, almost all articles consist of unproven and untested swing trades. Swing trading is difficult, but we believe you face much better odds the more you backtest and generate trading ideas. Backtesting works and gives you a good estimation of what you can expect.

Below we provide you with 10 free swing trading strategies that work. They are all backtested many years ago, some were published on this website as far back as 2012, and the swing trading strategies have proven to hold up well after they were published. These are some of the best swing trading strategies that we can come up with at this time.

What is swing trading?

First, we need to define what we mean by swing trading.

As we see it, swing trading is a style that is longer than day trades but not more than a couple of months. Day trading buys and sells the same day, while position trading and buy and hold have time frames that last years and even decades.

We believe that different time frames in trading are an excellent tool for diversification – a vital tool to smooth drawdowns:

• What is the Holy Grail in trading?
• Which time frame is best in trading?
• Which is the best indicator for swing trading?

If you are interested in learning more about swing trading, we recommend reading this swing trading guide.

5 swing trading strategies video

In the video below, we present 5 backtested swing strategies. A few of them are not included in this article. The video includes trading rules, equity curves, statistics, and metrics (we have plenty of videos on our YouTube Channel):

Why swing trade? The advantages of swing trading

Buying and holding stocks have returned about 10% annual CAGR over the last 100 years, and many see little value in trying to time and trade the markets by swing trading.

Our answer is: yes, for the majority, it makes sense to buy some mutual funds and forget about it (but save regularly). Time will compound your capital while you do nothing and continue your everyday life. But of course, this is a “get rich slowly” approach that requires decades.

• Is It Better To Trade or Invest In Stocks? (What’s The Difference?)

Warren Buffett made 99% of his wealth after he turned 50! This is how compounding works: you need time, a long runway, and lots of patience.

The main advantage of buying and holding is that it works as long as we as a society can become ever more efficient. Efficiency gains are transferred to owners of companies that produce goods and services, and thus owners are rewarded in the long run.

Because of this, we believe that a buy-and-hold portfolio consisting of mutual funds/ETF and stocks (or both) should always be the cornerstone of your savings and capital.

However, why not do both – swing trading and buy and hold – as we do? If you backtest and do swing trading systematically, we believe most rational investors can make excellent risk-adjusted returns.

The advantages of swing trading can be summarized like this

• Lower drawdowns by being invested only when you have an edge.
• Lower drawdowns mean you can use a bit of leverage (if you want to use leverage).
• Can turn around capital fast – little idle money. You are only invested when you have an edge.
• Swing trading is scalable. Read more here for scalable vs non-scalable. You can make money quickly.

Thus, before you swing trade, we recommend figuring out if this is something for you.

Swing trading comes with risk

However, you can also waste time and money if you don’t make swing trading work. Swing trading is not easy, and please make sure you only risk money that you can manage to live without. We also recommend trading it mechanically or automatically via a trading platform (algo trading), for example, Amibroker.

Always start small and trade smaller than you’d like to avoid behavioral mistakes. Furthermore, the trading strategies below can only be considered ideas – they might even contain minor errors. Always do your own research and never trust anyone except yourself. Always verify the strategies yourself!

• The most common trading biases

Victor Niederhoffer had a relevant comment in his book called The Education Of A Speculator:

Self-trust is the foundation of successful effort.

Which indicator is best for swing trading?

We have made a test where we compared what we believe are the best indicators for swing trading. The best indicator is one that is not so well known:

• Which Is The Best Indicator For Swing Trading?

10 free swing trading strategies

All the swing trading strategies below are taken from our landing page for free trading strategies. These are articles we have published since 2012.

However, we remind you that our best trading edges/strategies are reserved for those who pay the subscription fee:

All strategies below are backtested in Amibroker. If you want the code for the strategies, you can order them here (many are also in Tradestation code).

As a bonus, you get all the code for all the other free trading strategies we have published since 2012. However, the majority is only provided in Amibroker code. Alternatively, you can learn coding in our Amibroker course.

Relevant articles about swing trading:

If you are new to trading and don’t understand the terminology or indicators, these articles provide you with relevant information:

• How to find trading edges in the markets
• Night trading strategies (overnight edges/strategies)
• The profit factor explained
• The Sharpe Ratio Explained
• How to deal with drawdowns
• What is a good trading strategy?

Swing trading strategy no. 1: Monday reversal in the S&P 500:

This strategy can be traded in the ETF with the ticker code SPY or the futures market: the e-mini or the recent micro contract.

This strategy was published in 2012 and in plain English works like this:

1. Today is Monday.
2. Today’s close is lower than Friday’s.
3. Friday’s close was lower than Thursday’s close.
4. If 1-3 are true, then buy at the close.
5. Exit at the close next Monday or Tuesday if Monday is a holiday.

This is all there is to it, pretty simple.

100 000 invested in 1993 and compounded until July 2021 returns this equity curve and drawdowns:

• No. of trades: 261
• Average gain per trade: 0.82%
• CAGR: 7.3% (buy and hold 10.4%)
• Time spent in the market: 18%
• Max drawdown: 17%
• Profit factor: 1.95

 Swing trading strategy no. 2: Overnight swing trading strategy in the S&P 500

The strategy can be traded in the ETF with the ticker code SPY or the futures market: the e-mini or the recent micro contract.

The strategy is like this in plain English:

1. Today’s close must be down for the third consecutive day.
2. If 1 is true, then enter at the close.
3. Exit at the open tomorrow (no matter what).

This is the equity curve:

• No. of trades: 591
• Average gain per trade: 0.14%
• CAGR: 2.9% (buy and hold 10.4%)
• Time spent in the market: 8%
• Max drawdown: 8%
• Profit factor: 1.73

Swing trading strategy no. 3: Buy When S&P 500 Makes New Intraday High

The strategy can be traded in the ETF with the ticker code SPY or the futures market: the e-mini or the recent micro contract.

The strategy works like this:

1. Today’s IBS must be lower than 0.15.
2. Today’s high must be higher than yesterday’s 5-day high.
3. If 1 and 2 are true, then enter at the close.
4. Exit when today’s close is higher than yesterday’s high.

This is the equity curve:

• No. of trades: 205
• Average gain per trade: 0.46%
• CAGR: 3.25% (buy and hold 10.4%)
• Time spent in the market: 11%
• Max drawdown: 21%
• Profit factor: 2.27

Swing trading strategy no. 4: Monday/Tuesday trade in Nasdaq

This strategy can be traded for the ETF with the ticker code QQQ or the futures market: the NQ e-mini or the recent micro contract.

In plain English, the strategy can be described like this:

1. Today is Monday or Tuesday.
2. Today’s IBS is 0.15 or lower.
3. If 1 and 2 are true, then buy the close.
4. Sell when today’s close is higher than yesterday’s high.

100 000 invested in 1999 and compounded until July 2021 returns this equity curve and drawdowns:

• No. of trades: 271
• Average gain per trade: 1.21%
• CAGR: 15.1% (buy and hold 9.1%)
• Time spent in the market: 19%
• Max drawdown: 28%
• Profit factor: 3.1

Swing trading strategy no. 5: Rotation strategy in SPY and TLT

This strategy rotates between being invested in SPY and TLT and is always invested. The strategy was first published in 2017.

1. Every month rank SPY and TLT from the month’s close to the previous month’s close.
2. On the next day’s open, buy the ETF with the best performance of the last month. If you are already long the one with the best performance, keep holding.
3. Rinse and repeat.

100 000 invested in 2002 and compounded until July 2021 returns this equity curve and drawdowns:

• No. of trades/switches: 110
• Average gain per trade: 1.98%
• CAGR: 10.3%
• Time spent in the market: 100%
• Max drawdown: 22%
• Profit factor: 2.7

Swing trading strategy no. 6: Rotation strategy in SPY, EEM and TLT

This strategy rotates between being invested in SPY, EEM, and TLT – always invested. The strategy was developed in 2017, and thus we have four years of out-of-sample testing.

1. Every month rank SPY, EEM, and TLT from the month’s close to the previous month’s close.
2. On the next day’s open, buy the ETF with the best performance of the last month. If you are already long the one with the best performance, keep holding.
3. Rinse and repeat.

100 000 invested in 2002 and compounded until July 2021 returns this equity curve and drawdowns:

• No. of trades/switches: 136
• Average gain per trade: 1.87%
• CAGR: 12.1%
• Time spent in the market: 100%
• Max drawdown: 23%
• Profit factor: 2.3

Swing trading strategy no. 7: XLP mean reversion strategy

This strategy is meant for consumer staples: the ETF with the ticker code XLP.

The strategy is like this (this is close to Bollinger band strategy):

1. Calculate an average of the H-L over the last 25 days.
2. Calculate the (C-L)/(H-L) ratio every day (IBS).
3. Calculate a band 2 times lower than the high over the last 25 days by using the average from point number 1.
4. If XLP closes under the band in number 3, and point 2 (IBS) has a higher value than 0.4, then go long at the close.
5. Exit when the close is higher than yesterday’s high.

100 000 invested in 2000 and compounded until May 2021 returns this equity curve and drawdowns:

• No. of trades: 429
• Average gain per trade: 0.46%
• CAGR: 9.5% (buy and hold 7.7%)
• Time spent in the market: 31%
• Max drawdown: 17%
• Profit factor: 1.93

Swing trading strategy no. 8: MACD-Histogram on the S&P 500

We read about the MACD-histogram for the first time in Alexander Elder’s Trading For A Living. The indicator is based on the MACD indicator, and you can read more in this article:

• Does the MACD indicator work? (Including strategies)

In plain English, the strategy works like this:

1. Today is the fourth day in a row where the MACD-histogram is down compared to the day before.
2. The fourth latest bar must have been below zero.
3. The current close of the S&P 500 must be lower than the day before.
4. If the above three criteria are true, then buy at the close.
5. Exit on the close when today’s close is higher than yesterday’s high.

100 000 invested in 1993 and compounded until July 2021 returns this equity curve and drawdowns (the strategy has not performed well during the last four years:

• No. of trades: 139
• Average gain per trade: 1.05%
• CAGR: 5.1% (buy and hold 10.4%)
• Time spent in the market: 5.7%
• Max drawdown: 16%
• Profit factor: 4.7

Swing trading strategy no. 9: The turn of the month strategy in the S&P 500 (and Nasdaq)

The stock market shows abnormal returns at the end of the month and the first days of the new month. The turn of the month strategy can be used as a stand-alone strategy, but we use it after adding one filter (in the Monthly Trading Edges).

In plain English, the strategy is as follows:

• Buy at the close on the fifth last trading day of the month.
• Exit at the close of the third trading day of the new month (after seven trading days).

This is all there is to it. It’s a simple strategy that is only invested about 33% of the time, but it holds up pretty well with buying and holding, which spends 2x more time in the market.

• No. of trades: 341
• Average gain per trade: 0.66%
• CAGR: 7.6% (buy and hold 10.4%)
• Time spent in the market: 33%
• Max drawdown: 21%
• Profit factor: 2.1

The equity chart for QQQ is not as good as the dot-com bubble, forcing it into a drawdown of 51%, but it is still substantially better than the index’s 83% drawdown. The CAGR since inception is still a respectable 7.3%:

Swing trading strategy no. 10: Trend-following by using the 200-day moving average and the 12 month moving average

My metric for everything I look at is the 200-day moving average of closing prices. I’ve seen too many things go to zero, stocks and commodities. The whole trick in investing is: “How do I keep from losing everything?” If you use the 200-day moving average rule, then you get out. You play defense, and you get out.

This is what Paul Tudor Jones once said about the 200-day moving average. He is somewhat correct: the 200-day moving average is an efficient tool to keep you out of problems.

However, it has its downsides. One of them is frequent whipsaw trades that can lead to underperformance. As long as the asset you are swing trading has no major drawdowns, you are unlikely to beat buy and hold. This is evident in the S&P 500 after the GFC in 2008/09 (the S&P 500 being fueled by quantitative easing).

We have covered the 200-day moving average before in these two articles (we used the 12-month moving average in the article about gold):

• Trend-following system/strategy in gold (12-month moving average)
• A simple trend-following system/strategy on the S&P 500 (By Meb Faber and Paul Tudor Jones)

Let’s test this simple strategy in the S&P 500:

• If the close crosses above the 200-day moving average, we buy at the close.
• If the close crosses under the 200-day moving average, we sell at the close.

You can also buy at the next day’s open because it doesn’t change the strategy much.

The performance since 1960 is like this (this is the cash index and doesn’t include reinvested dividends):

The main advantage of the 200-day moving average is exactly what Paul Tudor Jones said: it keeps you out of big trouble and acts as a good defense. The most significant drawdown is only half of the buy and hold strategy: 28 vs. 55%.

• No. of trades: 187
• Average gain per trade: 2.5%
• CAGR: 6.75% (buy and hold 7.1%)
• Time spent in the market: 70%
• Max drawdown: 28%
• Profit factor: 2.8

Bonus swing trading strategy: 12-month moving average trading system in gold

What about gold? We are long gold when the close is higher than the 200-day moving average, and we are out (sell) when gold is below the 200-day moving average.

It turns out the simple moving average does a great job of keeping you out of problems:

The reason why the strategy beats buying and holding gold is that it keeps you out of the worst drawdowns.

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Are most swing traders successful?

Unfortunately, not. The reason is due to two factors:

1. Short-term trading is a zero-sum game.
2. Most traders don’t have a statistical trading edge in the first place.

What are realistic swing trading returns?

Most traders have completely unrealistic expectations. If you have over a decade managed 10-20%, you are pretty good! You have to focus on risk-adjusted returns, i.e., the return and the drawdowns.

• What Is A Good Maximum Drawdown? Why Is Max Drawdown Important In Trading?
• Trading System And Strategy – Performance Metrics (What Is It And How To Use It)

If you are dreaming of triple-digit returns, we believe you are just dreaming. No one can have such returns over a long period without sooner or later having a huge loss.

What are the most successful swing traders?

We believe the best swing traders have quantified their strategies (they are algo traders). They use mechanical trading strategies that are both backtested and tested out-of-sample.

• Mechanical Trading Strategies Vs. Discretionary Trading Strategies

Can this momentum strategy be improved?

We are not oracles, and we are pretty sure there are traders out there who can improve this strategy. Do you have any ideas on how to improve it? If so, please comment below or drop us an e-mail.

Can these Swing trading strategies be improved?

We are not oracles, and we are pretty sure there are traders out there who can improve this strategy. Do you have any ideas on how to improve it? If so, please comment below or drop us an e-mail.

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10 free swing trading strategies

You don’t need to be a rocket scientist to make money in trading. However, it takes years to develop experience, but we believe these 10 free swing trading strategies can give you a good idea of how to proceed. However, our best trading strategies are not for free. You can either subscribe to monthly trading edges, or you can buy single strategies.