Swing Trading

Do you know about swing trading? Swing traders ride the swings or oscillations that markets make as the stock or currency pair pivots from one price level to another. Swing trading is just one of the many different styles of trading but it is the best style regardless of the market you trade. The three most popular trading styles are day trading, swing trading and trend or buy and hold trading. Swing trading sits in the middle of these styles and I personally recommend this as the absolute best style of trading, for any kind of market. Let's take a look at the other styles.

Day traders typically keep their trades confined to a single trading day, hence the name. Scalping is also considered a day trading style of trading. Scalping typically involves high risk but in turn offers potentially high profits. Buy and hold traders take the extreme of trading and commonly hold trades for several weeks to months. A trader typically needs substantial trading capital to be able to make any decent profit from buy and hold trading.

Swing trading fits in between the above two styles and usually involves holding a trade for around 1 to 4 days, less than a week. Do traders hold trades for longer periods? Of course, but this is just a general rule of thumb. While swing trading can be applied to any market, some are more suitable than others. Many traders swing trade because it is the only style to offer high rewards with the lowest levels of risk. This is the perfect balance for trading profitably.

Buy and hold trading typically involves high levels of capital that far exceed the profit potential. The most effective style of trading is swing trading. A trader can apply swing trading to any market regardless of where they may live in the world.

You may not have thought of it before but the hardest thing about trading is the psychology of it. Unfortunately, the area of psychology is something often overlooked as many traders are unaware of just how important it is. Psychology plays such an important role in swing trading that it is the key to trading success.

The term psychology here refers to managing yourself while trading. Trading induces a wide variety of emotions and reactions in people, more so when a trade they have just placed begins to make a large profit or loss. Many people lose control when it comes to trading and the thought of how much money they might possibly earn clouds their judgement.

If psychology is so important then why would so many people ignore it? The idea of finding out bad things about yourself is what keeps most people away from learning about psychology. This is the same kind of fear that ruins a good trade.

Success or failure at swing trading is entirely dependant on you. Are you ready to suffer that loss or enjoy that win? Changing your thinking is crucial to being successful in trading.

As a trader, you have available at your dispose many styles of trading, regardless if you prefer stocks over FOREX or options over futures. With such risk involved in trading, you should consider spending sometime examining the styles of trading and discover which one is the best. Swing trading is the absolute best trading style to improve your trading odds.

Two simple but powerful reasons make it clear why swing trading is second to none. The first is that swing trading doesn't require you to spend long days in front of the monitor watching charts waiting for the precise second to enter a trade. How many new traders do you know that think they must sit in front of a monitor all day waiting for a trade? Probably quite a lot. Typically, this kind of trading doesn't help at all and instead ends up with blown up trading accounts. There is no reason to be glued to a computer screen waiting for a trade entry or setup. Swing trading allows you to spend as much or as little time in front of the screen as you want. Trade setups don't need to be calculated down to the second.

In addition to trading freedom, swing trading is extremely low risk. Swing traders see the big picture. By watching higher timeframe charts, swing traders can spot trends with much more ease. Lower timeframes mean more noise which means more risk. The trends they see may only last minutes or hours. Higher timeframe trends can last for days, weeks or even months and as a result are much easier to trade. By being able to trade in the direction of these major trends, returns on your investment are increased greatly while the chance of a loss is reduced significantly.

Each person has their own style of trading, but if you are looking to gain an edge over the markets, no matter the market you trade, then swing trading should be something you look at. Swing trading benefits a trader by allowing them to place trades in the direction of major trends and as a result increases their chances of winning and gives them a true trading edge.

Swing trading offers a trader the chance to reap massive returns but without the usual high levels of risk you may find in other styles of trading. Swing trading is not limited to any specific market and can be used on any market around the world. However, a market must posses to main key factors in order for you to be able to enjoy the benefits of swing trading.

First, to swing trade a stock it must show signs or have a tendency to trend. There are markets where there seems to be no trend with price jumping up and down with almost no reason as to why. Swing trading requires the market you trade to show a high level of trendiness. A market that trends allows a swing trader to take pieces of the market as price swings up and down.

Secondly, the stock must not be too volatile. If your market is too volatile, it will be difficult to open and close trades in time before price moves against you. Swing trading takes time and as a result if a stock moves too fast or too abruptly in any one direction, it does not give you time to plan your entry and exit. The best kind of market to trade is one that is traded heavily.

To make the most of swing trading you must first find a market that has a high tendency to trend and is not too volatile. Following this advice will put you on the path to becoming a profitable stock swing trader.

Having an indicator that was able to warn or show when markets were nearing turning points would make swing trading much easier. If you could know in advance when a market was ready to turn, this would greatly increase your chances as a trader of entering into a profitable trade. Luckily, there are indicators already available that can do exactly this. These indicators are known as momentum indicators.

While many indicators are lagging, momentum indicators are leading. Basically, momentum indicators offer an insight into what price may do in the near future. Momentum indicators work on the basis of measuring a currency pair's level of momentum. As a currency pair begins to slow down and lose speed or momentum, momentum indicators alert you to this change in speed or momentum and that a retracement of price may soon be approaching. Measuring the momentum of a market makes it easier for traders to know where price may go in the near future and manage their trades.

A very popular and widespread momentum indicator is RSI. The RSI (relative strength indicator) shows levels of a currency pair that are considered overbought or oversold. When the indicator is in these areas, a trader should be on the lookout for potential price retracement. When a market enters these areas of overbought or oversold, more often than not price will experience some kind of adjustment in the near future. Knowing that an adjustment of price may happen, you can manage your trades before it is too late and essentially increase your trading edge.

If you want to know future price movement in advance, then take a look at momentum indicators, especially the RSI, today. Of all the momentum based indicators, RSI is the most widespread and widely used. The RSI may just be the indicator you have been looking for to gain an edge over the market.

Managing your trading funds well is the key to winning at swing trading. If traders have poor money management, as soon as they start making profits many traders will begin to double or triple the size of their trades. They do this with the hope of increasing their returns exponentially. However, this style of trading thanks to poor money management usually results in traders blowing up their trading accounts and losing more money than they make.

Proper money management should address the following issues:

Detach yourself emotionally from the money.
Never trade more than you are comfortable with.
Never risk more than you stand to win.

First, you need to remove any kind of emotional attachment to the money you use for trading. Make sure that any money you plan to use for swing trading is money that you can live without. This isn't about failure or the worry of failure. It is about being smart. Trading with money that was set aside for other more important needs will only add stress to your trades. Do you really need to make trading any more difficult by worrying about how you will feed your family if you lose next week's paycheck? Of course not.

Second, always start your first trades using very small amounts. Don't be in any kind of hurry. The markets will be around for years to come and you should be in no rush. Just how small should you start trading? The answer to this depends on you, what do you feel comfortable with. While trading, you should be focused on trading and not on how much money you may win or lose. To avoid having this happen, only trade with amounts that you feel ok with. You can even start trading using nothing more than a few cents. What is important is that you are comfortable and are in control of your trading.

How can you identify a good swing trading strategy? Do good swing trading strategies have any features that make them better than others. Are there any key points that a strategy must address to truely be considered good? Swing trading is based on proper trend identification and using market rallies and market pullbacks to enter.

The most important element of swing trading is trend identification and trading only with the trend. Why is the trend such a major factor for swing trading? It is widely believed and said that the smart money is the trend and by following it you stand to win more than you lose. This makes sense then that the most reliable trading strategy is one that goes with the trend. This greatly increases your chances of making a profit and being successful in the long run.

In addition to trend identification, swing trading strategies take advantage of market rallies and pullbacks. Swing traders do not just enter haphazardly in the market, swing traders are looking for an opportunity to get into the market. By waiting for a retracement to occur, this allows a swing trader the opportunity to get into the market at a good price. Why is this even important? Entering the market at a price that is in your favour means you stand to profit more.

A good swing trading strategy is one that is based around trend trading and entering the market at a time where you stand to get a good price. Swing traders manage to do this by waiting for price to retrace before it continues on with the main trend.