In the fast-paced world of stock trading, there’s a smart strategy called swing trading. It’s not about long-term commitments or quick day trades but rather making gains from short to medium-term market ups and downs. It’s like catching waves in the stock market to secure profits without constantly watching. In this article, let’s look at the best stocks for swing trading based on fundamental indicators.
Best swing trade stocks – Updated June 2024
| Name | Sub-Sector | Market Cap (Rs. in cr.) | Close Price (Rs.) | PE Ratio | Debt to Equity (%) | 5Y Avg Return on Equity (%) | PEG |
| ITC Ltd | FMCG – Tobacco | 547,080.49 | 435.65 | 28.51 | 0.44 | 24.28 | 1.84 |
| Hindustan Aeronautics Ltd | Aerospace & Defense Equipments | 268,693.73 | 3,939.35 | 46.11 | 0.22 | 24.67 | 0.53 |
| Bajaj Auto Ltd | Two Wheelers | 244,564.26 | 8,903.65 | 31.73 | 0.42 | 21.54 | 0.12 |
| Bharat Electronics Ltd | Electronic Equipments | 172,072.19 | 233.75 | 57.66 | 0.44 | 20.78 | 14.12 |
| SBI Life Insurance Company Ltd | Insurance | 142,443.44 | 1,436.55 | 75.22 | 0.00 | 15.82 | 3.98 |
A Brief on the Filters Used
When it comes to selecting the best stocks for swing trading, several key factors come into play. One popular approach uses fundamental indicators such as the Price to Earnings to Growth ratio (PEG), debt-to-equity, and Return on Equity (ROE) to filter potential stocks. The PEG ratio helps evaluate a stock’s valuation relative to its growth prospects, while the debt-to-equity ratio assesses the company’s financial leverage.
Additionally, ROE provides insight into the profitability and efficiency of a company. By considering these indicators, swing traders can identify stocks with solid growth potential, manageable debt levels, and strong profitability, increasing the likelihood of capturing favourable price movements during their trading timeframes.
Details of Top 5 Swing Trading Stocks
ITC Ltd
ITC Ltd, a prominent player in the FMCG – Tobacco sector, is known for its diversified business, which includes tobacco, hotels, paperboards, packaging, and agri-business. The company, as of 30th April 2024, had a market capitalisation of Rs. 547,080.49 cr. and a stock price of Rs. 435.65. ITC Ltd’s PEG ratio is 1.84%, and the debt-to-equity ratio is 0.44%. The 5-yr average return on equity of the stock is 24.28%.
Hindustan Aeronautics Ltd
Hindustan Aeronautics Ltd specializes in aerospace and defense equipment manufacturing, contributing significantly to India’s aviation and defense sectors. The company, as of 30th April 2024, had a market capitalisation of Rs. 268,693.73 cr. and a stock price of Rs. 3,939.35. Its PEG ratio is 0.53%, and the debt-to-equity ratio is 0.22%. The 5-yr average return on equity of the stock is 24.67%.
Bajaj Auto Ltd
Bajaj Auto Ltd is one of India’s leading two-wheeler and three-wheeler manufacturing companies, known globally for its motorcycles, scooters, and auto-rickshaws. The company, as of 30th April 2024, had a market capitalisation of Rs. 244,564.26 cr. and a stock price of Rs. 8,903.65. Bajaj Auto Ltd’s PEG ratio is 0.12%, and the debt-to-equity ratio is 0.42%. The 5-yr average return on equity of the stock is 21.54%.
Bharat Electronics Ltd
Bharat Electronics Ltd operates within the electronic equipment sector, primarily serving the defense industry by manufacturing advanced electronics products. The company, as of 30th April 2024, had a market capitalisation of Rs. 172,072.19 cr. and a stock price of Rs. 233.75. Its PEG ratio is 14.12%, and the debt-to-equity ratio is 0.44%. The 5-yr average return on equity of the stock is 20.78%.
SBI Life Insurance Company Ltd
SBI Life Insurance Company Ltd is a key player in the insurance sector, offering a wide range of life insurance and pension products. The company, as of 30th April 2024, had a market capitalisation of Rs. 142,443.44 cr. and a stock price of Rs. 1,436.55. Its PEG ratio is 3.98%, and it operates with a debt-to-equity ratio of 0.00%. The 5-yr average return on equity of the stock is 15.82%
What is Swing Trading?
Swing trading is a trading strategy that involves holding positions in financial assets for short periods, typically several days to several weeks, in order to capitalise on short-term price movements. It is a speculative practice aimed at producing capital gains in the medium term, often leveraging technical analysis to determine optimal entry and exit points. Swing traders focus on short-term trends and aim to profit from expected price moves, utilizing patterns and signals that indicate potential future movements in stock prices.
Unlike day trading, where positions are opened and closed within the same day, swing trading allows positions to be held over several days or weeks. This strategy enables traders to avoid the intraday market noise but exposes them to overnight and weekend market risks, where prices could change dramatically due to off-hours news events. Swing trading is adaptable to various financial markets and is particularly popular among traders seeking to actively manage their portfolios actively, optimising positions to take advantage of stock price oscillations and market volatility. It offers a balance for those looking for larger gains than typical buy-and-hold strategies but who do not wish to engage in the constant monitoring required by day trading.
Benefits of Swing Trading
- Potential for substantial profits: Swing trading has the potential for substantial profits by capitalising on swift market moves. This trading style allows traders to yield significant returns over short periods, taking advantage of quick shifts in market dynamics.
- Market momentum utilisation: Swing trading leverages short-term trends to benefit from market momentum. By focusing on these trends, traders can strategically position themselves to profit from the market’s directional momentum, which is often driven by broader economic indicators or sector-specific news.
- Reduced overnight risk: Swing trading involves reduced overnight risk compared to day trading. By holding positions for several days, swing traders are less exposed to the risks that come from overnight market changes, which can be unpredictable and driven by off-hour news events.
- Part-time suitability: Swing trading offers flexibility, making it suitable for those with other commitments.** This approach to trading can accommodate part-time engagement, allowing individuals to trade without needing to monitor the markets continuously throughout the day.
- Diverse opportunities: Swing traders have access to diverse opportunities across various markets and sectors. This trading style is not limited to specific types of assets or markets, providing traders with the flexibility to explore a wide array of opportunities depending on their interests and market conditions.
- Technical analysis application: Swing trading employs technical analysis to enhance decision-making by identifying potential entry and exit points. Utilising charts, indicators, and historical data, swing traders can make informed decisions on when to enter or exit trades, optimising their chances for profit.
- Lower transaction costs: Swing trading can lead to lower transaction costs over time due to fewer trades compared to day trading. By engaging in fewer transactions, swing traders can potentially save on costs associated with trading, such as commissions and spreads, which can add up in more active trading styles.
Risks of Swing Trading
Swing trading, a popular trading strategy, involves buying and selling financial assets within a short period, typically several days to several weeks, to capitalise on short-term price movements. While it can be a lucrative way to generate income, swing trading also carries risks that investors should be aware of.
- Higher Risk Involved: Despite the knowledge element required in swing trading, there are often higher risks involved. Even if one uses the best of techniques, stock markets are unpredictable and may result in losses at times. Using stop-loss orders can help in limiting the losses due to movements within a short span.
- Market Risk and Position Risk: When it comes to trading, there are two types of risk: market risk and position risk. Most traders experience both forms of risk. However, swing traders are more likely to experience position risk than market risk. This is due to the strategy of looking to profit off short-term price movements.
- Vulnerability to Gap Ups and Gap Downs: In swing trading, vulnerability to gap ups and gap downs is there. If your trade is in opposite direction and the stock or index opens with a gap up or gap down, it could lead to heavy losses, and even stop losses are not able to protect in such cases.
- Managing Risk in Swing Trading: To manage risk in swing trading, traders can use strategies such as trading smaller positions, using stop-loss orders, and diversifying their portfolios. These strategies can help limit the losses due to movements within a short span and ensure that the risk is managed effectively.
Swing trading can be a lucrative way to generate income in the stock market, but it is essential to manage risk to ensure that the strategy is successful. By understanding the risks involved and using strategies to manage them, investors can minimise their exposure to losses and maximise their returns.
Is Swing Trading Safe?
Swing trading, like all trading strategies, involves risk and isn’t inherently “safe.” While it can offer substantial profits, it also exposes traders to potential losses. The risks arise from market volatility, the need for accurate timing in entering and exiting positions, and exposure to overnight and weekend price changes. Traders can manage these risks by using stop-loss orders, diversifying their investments, and staying informed about market conditions. Ultimately, the safety of swing trading depends on an individual’s risk tolerance, market knowledge, and trading discipline.
To Conclude
Stock selection criteria for swing trading varies from investor to investor. Remember, it is crucial to conduct your own research before investing. For this purpose, #TickertapeHaiNa! With over 200 filters, custom filters, pre-built screens, custom universes, a linking watchlist, export data, and more features, Tickertape Stock Screener is your perfect companion for finding the next best stock for your portfolio. Don’t wait; seize the opportunity now!
FAQs on best stocks for swing trading
- How can I effectively pick stocks for swing trading using technical analysis?
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Utilise Tickertape Stock Screener for swing trading to filter stocks based on key technical criteria like PEG. By selecting stocks with strong fundamentals and clear trends, traders can enhance profitability in swing trading. - What criteria should I consider when selecting stocks for swing trading?
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Incorporate swing trading stock selection strategies that involve technical analysis and trend confirmation. By utilising tools like moving averages and trendlines, traders can effectively pick stocks for swing trading and increase the potential for profitable trades.
