As a forex trader or the one who is interested in the industry, you know that there are many different ways to trade the market.
One popular strategy is swing trading. It can be a great way to make profits in the forex market, but it can also be risky if you don’t know what you’re doing.
In this article, we will introduce you to swing trading and so you will learn some basics to understand where to start.
Swing trading definition
Swing trading is about waiting for that perfect opportunity and then taking advantage of it before your competition does.
Swing traders are often looking for quick profits, and this style of trading can be very effective. They primarily use technical analysis, which studies how prices change over time and is based on various factors like supply/demand considerations or economic trends. In addition to analyzing prices and trends, they can use fundamental analysis.
So, the strategy is something like a combination of these two.
The idea behind swing trading is that you take trades that last from days up to months depending on how long your anticipated price move will be.
How does swing trading work?
Traders hold a position for more than one day, but not more than a few weeks or months. This is a general time frame, but it can be different for different types of trades. For example, some trades might last longer than a few months, but the trader still considers them swing trades. Swing trading can also happen during the day, but this is less common and happens when conditions are extremely volatile.
The goal of swing trading is to make a profit from the price movement of an asset. Some traders look for stocks with a lot of movement, while others might prefer calmer stocks. In both cases, the trader tries to identify where the asset’s price is going to move next and take a position. If the price move happens, the trader “captures” a profit.
Selecting the right stocks
In order to be successful at swing trading, it is important to select the right stocks. The stock must be in an uptrend and have volume and liquidity in the market. Additionally, large-cap stocks are typically best for swing trading as they fluctuate by a wide range of highs and lows in an active market. Swing traders will trade with the trend until it changes direction, at which point they will switch positions.
Selecting the right market
When the market is really extreme, like when it’s really bullish or bearish, even the most active stocks can start to behave strangely. That’s why as a swing trader you should select a more moderate market where indexes move within a certain range for a few weeks or months at a time. In this kind of market, there are usually fewer wild swings in stock prices, making it easier to predict where the prices will go next.
Swing trading is a great strategy for those who want to make a profit in the financial markets, but don’t have the time to wait for long-term price movements. It can be a little more complicated for beginners, but with practice, it can become quite easy. Take your time and hone your skills until you feel confident enough to start swing trading with real money. Follow the regulated forex brokers in South Africa to find the best brokers.
About The Author ? George Rossi
George is the Chief Market and Broker Analyst at brokertested.com. Prior to being recruited by brokertested.com, I served SVS Securities as Chief Market Analyst for two years. Earlier, he joined Morgan Stanley in Nov 2013 as Research Analyst.
George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.
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