I have already written a
post on the subject and talked about this kind of trading strategy in many of
my posts, but I still want to deal with it in this article. Swing trading is type of trading system
when a trader keeps his position open from one day to a few weeks. Much depends
on the momentum that a security gains from some piece of news or any other
fundamental as well as technical factor(s). A lot of day traders ultimately
become swing traders as they get disappointed with trading short term trading
strategies such as scalping or similar ones.
The key difference from any
other day trading style is that a trader who uses swing trading system relies
more on long term charts such as: daily, 8 hour, 4 hour and less often on 1 hour,
30 minutes or 15 minute charts. This, as you may understand allows him to avoid
various ‘daily market noises’ that are bountiful and concentrate on a bigger
picture. If you only look at what happens on this particular day you will never
know what caused this or that big move in the market. Maybe some bank unloaded
its’ huge position or some crazy piece of news caused traders to buy or sell
some particular securities.
In swing trading you want to
catch a bigger move and capitalize on it as much as possible. It is very
similar to trend trading and in some
cases these terms absolutely coincide. However, trend trading refers to bigger
moves than market swings and usually last longer. Some traders tend to call any
tendency short or long term that is in the market to be a trend. They might be right to some extent, but then we should
definitely distinguish between mega and micro trends, because trend traders
would follow the former ones and day traders the latter ones.
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Range trading
can also involve various swing trading strategies. It is a broader concept as market
swings usually happen within a certain market range. The best way to trade
those is to enter a long trade at the bottom of the range and go with the full
swing till the top of the range where you close your long order and reverse by
taking a short order which you (possibly) keep till the bottom of the range. Of
course, market never forms perfect swings, but I hope you understand what I
mean.
Hope the post was useful.
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.