In this post I want to
continue the topic of swing trading and to cover the advantages of swing
trading in financial markets. I think I will have to talk about disadvantages
too. But that will be in my future posts. I have already mentioned in my
previous post that I consider myself a swing trader. Let me give reasons why I
have chose this way to trade the markets.
Firstly, you have bigger
opportunities to have better risk/reward ratio. One should know that in order
to have consistent profit in trading one must have his profits bigger than
losses. A swing trader usually stays longer in the market and as if the price
goes in the direction he has predicted he will have much bigger profit than his
initial stop loss order is. If you compare that to scalping where a trader
might close 20 consecutive trades profitably and then one bad trade wipes away
all of his profit due to large stop loss and too small profit targets.
Secondly, it gives you a
chance to take advantage of current momentum in the market. When markets move
nowhere it is difficult to make money, but when they catch momentum and start
running in one direction, it is quite easy to have winning trades.
Thirdly, you do not have to
sit glued to your computer screen all day long. Doing a daily analysis for
about half an hour is enough. Monitoring your open trades does not take a lot
of time either.
Fourthly, it does not give
you so much psychological stress and does not require so much accuracy,
concentration and ability to react fast as is necessary in day trading. Stress
handling is essential in trading and in swing trading you have an upper hand.
Fifthly, your trades are
prepared and you are proactive rather than being reactive. You plan your trades
and do not react to some rumors, news and other similar things that a day
trader might have in mind while making his trades.
Sixthly, you do not have to
worry about exact entry level. This is impossible for day traders. If you
missed your entry level by 20 pips (in day trading) it is worthwhile thinking
whether to take a trade or not. In long term trading this is never a problem as
you are planning for a ride of 500 pips or more (in Forex). The same can be
said about stock or commodity trading (sorry for ignoring you guys).
And lastly (it naturally
flows out from point number six) you do not have to worry so much about exit
levels. By this I mean that you do not have to make spontaneous decisions as
exit levels are also pre-planned.
P.S. By the way, if you are
trading Forex, you can also make money from interest (if you are go long on
high yielding currencies).
Ok, hope you enjoyed the
post.
See also:
Disclaimer
Trading
financial markets carries a high level of risk, and may not be suitable for all
investors. All information on the blog http://trend0.blogspot.com/ is of educational
nature and cannot be considered as advice, recommendation or signals to trade
in any financial markets.