It’s time to swing trade like an expert. With swing trading, you have a forest trading tool that is sure to earn you huge profits. Plus, the modern trader has devised innovative strategies that are aimed at minimizing risks, increasing profits, and managing the whole thing surrounding swing trading. So, if these are the things you are looking for in trading, keep reading. Among other things, this article is going to take you through swing trading basics, the strategies that work like magic, and other important details that will help you trade like a pro.
Understanding Swing Trading
So, What Is Swing Trading? Understanding swing trading might be not so easy for some, but generally speaking, swing trading is a strategy that tries to establish multi-day chart patterns. With swing trading, you have an approach that lasts for more than one day. This strategy aims at attaining bigger moves (also known as swings) than those in typical day trade.
It’s also important to note that the FX swing trader can last for less than five minutes. So, a swing trader must employ advantaged techniques to effectively monitor and execute his/her trade. You need to familiarize yourself with fundamental and technical analysis to make informed decisions. Keep in mind that volatility plays a key role when it comes to the decisions you make. Also, volatility is something you should leverage to trade with the decision. It has helped traders before. For instance, a more volatile market tends to attract short-term moves—offering you a perfect opportunity to place swing-based trade.
But Why Should You Swing Trade?
Swing trade is a perfect strategy for the Forex market due to the following reasons:
- Excellent liquidity—with swing trading you have a strategy that will give you excellent liquidity.
- Volatility—Swing trading offers traders sufficient volatility forbes they can leverage to make interesting moves
- Time—with swing trading, you have a strategy that will enable you to achieve your trading target within a relatively shorter time.
Discipline Matters in Swing Trading
Like any other forex trading endeavor, swing trading takes discipline to succeed. Without discipline, you risk committing plunders that can cost you. Remember, swing trading can be seductively appealing to beginners because it’s user-friendly. However, the reality is that things aren’t that easy. You need a combination of discipline and strategy to make profits. Plus, you should embrace patience, mastery, and confidence.
Swing Trading Offers Increased Flexibility
Essentially, Forex is a diverse market—comprising of many ways of squeezing out profits. Besides trading strategies, you can employ a myriad of trading styles to invest. Plus, there are different trading options for investors. So, you are sure of getting a style that will suit your explicit needs.
With a swing trade, you’re striving to make a significant return on your investment from both short-term highs as well as low moves. So, you’ll need to carefully study such market moves and identify patterns that you’re able to exploit. Check out several currency pairs and try identifying commonalities to the moves.
Understanding the Possible Market Moves
You should also observe how the price moves end. Figure out how you can conduct business in such conditions. Bear in mind that swing trading is a trading style, not a strategy in itself. Several other indicators might be appropriate for this type of trading, especially any effective trend-following approach. You’ll need to lot at numerous charts to establish the risks and price swings associated with each method. You should always be keen to explore the time frames involved.
The method utilized for identifying the type of market move to follow isn’t complicated at all. It features two moving averages (MAs), a short one and a longer one. An MA refers to a continuously calculated arithmetic average of the market price for a particular number of periods. For instance, a short-term MA can be used to cross over a longer MA. And as an indication, you might notice a price swing inclined toward the direction of the cross. Together with this entry signal, the basic placement of stops as well as limits can be used as a means of exit.
Day and Swing Trading: The Difference
The difference between swing and day trading is the time in which positions are held. Typically, swing trading involves more than an overnight holding, while day traders close out positions even before the market closes. When it comes to swing trading, positions are held for several days or weeks, whereas day trading positions are often limited to a single day.
Holding overnight puts the swing trader at an unpredictable overnight risk like gaps against the position (either upward or downward). By taking on such a huge risk, swing trades are typically done smaller position size than day trading. Day traders often use larger position sizes and might utilize a day trading margin of up to 25 percent.
On the other hand, swing traders have access to a leverage of 50 percent. So, if the trader gets approved for margin trading, they’ll only need to invest USD 25,000 in the capital for a trade that’s currently valued at USD 50,000, for instance.
Swing Trading Tactics
Swing traders often strive to get multi-day chart patterns. Common patterns include moving average crossovers, triangles, cup-and-handle patterns, flags, as well as head and shoulder patterns. Key reversal candlesticks can also be utilized alongside other indicators to devise a comprehensive trading plan.
Each swing trader then formulates a strategy that provides them with an upper edge over several other trades. This entails looking for trade plans that lead to predictable stock price movements.
Take your swing trading game to another new level. With swing trading, you have a tool that will help you implement your trading strategy in the shortest time possible. Plus, there are different trading strategies and styles you can employ to nail more profits. The above guide contains everything you need to know about swing trading so that you can trade like a pro. Good luck!