How many trading strategies have you tried since you first started trading? Some experts believe that traders should try at least five different trading methods before settling on the most effective one for them. Let's at one of them. Let take a look at swing trading, a trading strategy that may suit traders of varying levels of experience and may produce positive results on a variety of timeframes.
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What Exactly Is Swing Trading?
Traders use this approach to try to catch market swings as asset prices fluctuate over short, intermediate, and long timeframes. Swing traders typically hold positions open for periods ranging from days to weeks or even months. Traders frequently use technical analysis of assets to forecast upcoming swings.
Case study:
"From Trade A. The trader has opened several trades in case study of USD/EURO trade. In it the trades are running several days as indicated by the days( yellow circles) running into the weekend. The trader went short (sell) though prices went up causing the trader to lose hence the red prices indicator at some point the prices started to lower hence the profits in green. Based on the above the trader hopes the market prices to lower further so as to close the trades in profits."
Analyzing price charts and patterns may assist them in identifying early warning signs of potential swings and determining the best time to enter a deal. For technical analysis, you can employ a variety of tools. Here are some basic technical analysis tools to consider using with your swing trading strategy.
1. Candlestick patterns
2. Heink-Ashi
3. The Moving Average (MA)
Moving Average is a group of technical indicator that are used to determine current trends.
4. The Alligator
5. Darvas Box
Darvas Box indicator is a tool that uses five states to draw the lower and the upper lines of a box by finding the lows and the highs.
When traders use technical analysis to identify a potential swing, they open either BUY (Going long) or SELL(Going short) position. They then watch to see if the asset price moves in the expected direction. If it does, they may be able to close the deal at a profit, for example. If not, they may decide to exit the losing situation and seek new opportunities.
Since the swing trading method involves a lot of technical analysis, it may be a suitable option for traders who like to analyze price charts and apply technical tools.
This might be time-consuming, especially when you are getting familiar with the trading platform and testing different instruments.
After you pick the most effective tools and learn to identify potential swings, you might spend less time in the trade-room.
Is swing trading safe?
Just like with any trading techniques such as day trading and others, there are risks involved.
First, the financial market can be volatile. What this demands is for you keep in mind the risk involved in this method and know how to handle them.
Second, With this method, trades can be kept open for long periods of time. What this has for trader is that a variety of factors can affect prices of products the trader entered in during the weekends when markets are closed. Also they may attract fees to keep and maintain open trade position.
Is swing trading profitable?
This trading approach may come in handy when trading on different asset over different times.
For traders who are busy and don't have much time to monitor prices in trade-room this may be attractive methods of trade.
However, some knowledge is required in technical analysis so as to make a trade upon seeing a potential swings before them happening.
By use of risk-management tools, capital or funds invested in a trade may be safeguarded to prevent huge loss against unpredicted and volatile markets this will in turn help grow your portfolio.
SEE MORE: https://youtu.be/5oZMSPyIb6g
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