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What is Swing Trading?
Swing trading is a popular style of trading in financial markets. It is used in the forex market as well as for cryptocurrencies and indices.
The main idea behind swing trading is to take advantage of price movements. The trader aims to detect such opportunities over a period of time. Trades include swing lows and swing highs.
Some of the advantages of swing trading include:
- Since the timeframe is over a short or medium term there is less need for control and analysis. Hence there is no need for the trader to monitor data all the time. Hence it is less time consuming and less stressful too.
- You can make the most of simple indicators so as to identify patterns and directions of trends.
- Swing trading allows you to make the most of longer trends too, hence you will be able to take more time to make your decisions calmly and carefully.
- Diversification of assets is possible with this style of trading.
- Financial news do not have too much impact on swing trading.
- Costs and commissions are relatively lower, and as a result the profits one can make per operation can be higher.
Having said that, there are also some disadvantages too, such as:
- The trader needs to exercise great mental control and an ability to be patient and calm.
- A higher initial capital sum will be required as one would have to settle guarantees, account margins and other requirements.
- The market is quite unpredictable and as a result swing trading is very susceptible to this, hence being quite challenging.
- Opening gaps could easily end up disrupting your trading strategy, and result in a loss of capital.
- Loss of funds could result as the stop loss could be easily achieved with this style of trading.
Swing trading relies a great deal on volatility. The trader will be looking for price movements in the short term so as to benefit from more opportunities. Hence swing traders tend to combine different tools so as to carry out fundamental and technical analysis to lead to better decision making.
Naturally the market can move either up or down and as a result different strategies can be used. The trader will thus need to choose which work best for him depending on the circumstances. The most commonly used strategies include:
- Trend trading using technical indicators to identify the direction the market is taking. In the case of an uptrend the trader will buy and close the trade to benefit from the swing highs, and vice versa
- Trading breakout this takes place when the price is said to break out from a particular range of price movements in which it was stable for a certain amount of time.
It is important that a beginner trader starts trying swing trading in a demo account until he feels confident and safe enough to use more initial capital in a real life trading situation. It is also a good idea to start trading with small diversified amounts so as not to risk all the capital on a single operation.
The main idea behind swing trading is to take advantage of price movements. The trader aims to detect such opportunities over a period of time. Trades include swing lows and swing highs.
Some of the advantages of swing trading include:
- Since the timeframe is over a short or medium term there is less need for control and analysis. Hence there is no need for the trader to monitor data all the time. Hence it is less time consuming and less stressful too.
- You can make the most of simple indicators so as to identify patterns and directions of trends.
- Swing trading allows you to make the most of longer trends too, hence you will be able to take more time to make your decisions calmly and carefully.
- Diversification of assets is possible with this style of trading.
- Financial news do not have too much impact on swing trading.
- Costs and commissions are relatively lower, and as a result the profits one can make per operation can be higher.
Having said that, there are also some disadvantages too, such as:
- The trader needs to exercise great mental control and an ability to be patient and calm.
- A higher initial capital sum will be required as one would have to settle guarantees, account margins and other requirements.
- The market is quite unpredictable and as a result swing trading is very susceptible to this, hence being quite challenging.
- Opening gaps could easily end up disrupting your trading strategy, and result in a loss of capital.
- Loss of funds could result as the stop loss could be easily achieved with this style of trading.
Swing trading relies a great deal on volatility. The trader will be looking for price movements in the short term so as to benefit from more opportunities. Hence swing traders tend to combine different tools so as to carry out fundamental and technical analysis to lead to better decision making.
Naturally the market can move either up or down and as a result different strategies can be used. The trader will thus need to choose which work best for him depending on the circumstances. The most commonly used strategies include:
- Trend trading using technical indicators to identify the direction the market is taking. In the case of an uptrend the trader will buy and close the trade to benefit from the swing highs, and vice versa
- Trading breakout this takes place when the price is said to break out from a particular range of price movements in which it was stable for a certain amount of time.
It is important that a beginner trader starts trying swing trading in a demo account until he feels confident and safe enough to use more initial capital in a real life trading situation. It is also a good idea to start trading with small diversified amounts so as not to risk all the capital on a single operation.