You may be into Forex trading or stock market trading to secure financial stability. These are only two of the sectors of this financial trading market. But apart from these, traders tend to trade using varying styles. For example, some may be into position trading while some are comfortable with day trading. All these trading styles vary and have distinct features. All the trading styles have their perks and facilities. But a trading style becomes the most efficient when it is used in the most appropriate situation.
Swing trading is also one kind of trading style and a successful method of stock trading. It is often considered a medium-term investment as it is mainly done on a monthly or weekly basis. Here are some of the characteristics of swing trading.
- Traders mainly use higher timeframes like weekly timeframes in this trade.
- In most cases, long-term traders don’t invest in this style.
- This is a mixture of both the day trading and position trading.
- Here, traders hold onto a trade for a week or month before closing their trade.
- This trading doesn’t require much monitoring compared to day trading only.
- Intermediate traders can easily try their luck with this style.
- Traders usually identify the best entry and exit points to generate the maximum profit
Advantages of swing trading
This trading style is mainly based on short-term trends where the stock price moves high and low quickly. When the price falls and rises quickly, it doesn’t give rise to long-term trends which is a good condition for swing trading. It also helps to avoid the confusion of fake-outs and breakouts as traders tend to deal with short trends. Breakouts are very important to indicate the inception of a long-term trade. While trying to identify a breakout, many traders often forget about the fake outs which can be pretty harmful to their position trading. But since swing trading deals with shorter trends, this hassle decreases by many folds. Use this link and get a demo account to learn more about short trends in the Forex market.
Even though it is also short-term trading like day trading, swing traders don’t need to face as much stress as day traders. Day traders often enjoy various trading opportunities than other traders as their trades don’t take a longer period to complete. But since the trading period is very short, traders often don’t get the time to come up with the best decision or make preparation for their trades,which can give rise to high risks in this trading style. Too much stress is never a good thing for your trading career.
On the other hand, in swing trading, traders get approximately one week to a whole month to prepare for their trades and make the best decision for their trades. They also enjoy better opportunities than position traders so their profit level is also typically better.
Trades end quickly
As traders are done with their trades within a couple of days, you get to know your results earlier as well. As you need to be a strategist rather than an analyst in swing trading, it is also a good way of verifying your winning strategies and cutting off the losing ones in your next trade. Ending trades earlier means more opportunities in the future. When a trader remains occupied with a single trade for several days, it becomes hard for them to invest in other trades let alone concentrate on them. But if you cannot concentrate on your trade then you may lose the winning opportunities to execute your trade. So, this marks one of the advantages of swing trading.
The most significant trait of this trading strategy is that it is a way to minimize risk. So, if you are looking for greater opportunities with lower risks, swing trading might be just what you are looking for.