Easiest Website Builder ever! · Build your own toolbar · Free Talking Character · Email Marketing
powered by
bravenet.com
|
|
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 finds a middle ground between day and buy and hold trading and is the preferred style, regardless of the 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. Some traders prefer scalping because of the high profit potential, although this comes with high risk. The other end of the trading spectrum is where you find buy and hold traders, holding their trades sometimes for many months. Without large trading capital, you will find that the buy and hold trading style can be difficult to profit from.
Swing trading is medium term focused and usually has traders holding trades for several days, but less than a week. Do traders hold trades for longer periods? Of course, but this is just a general rule of thumb. Some markets are more suitable for swing trading and it is important that you are trading the right currency pair or stock. 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. Only swing trading offers high rewards with low risk. This style of trading can be applied to forex, options, futures and many more markets.
There are many different ways you can trade a market, no matter if you trade the stock markets or dabble in the growing FOREX market. Trading by its very nature is risky, it would be advised to take some time and find out which style of trading offers the best and safest return on your investment. Such a style that offers this is that of swing trading.
There are two main reasons why swing trading is the best. 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. Many people become obsessed with trading and watch their charts day in and day out. All this usually results in is a tired trader losing money. There is no reason to be glued to a computer screen waiting for a trade entry or setup. Swing trading doesn't require you to be watching charts all day and instead gives you more freedom. 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. Trading low level timeframes is difficult as the trends come and go much faster. These trends can be so short lived that they are almost impossible to trade. 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.
Everyone is different and as a result the style of trading you prefer might be different to someone elses, but if you are looking for high reward with low risk then nothing comes close to swing trading. Less stress and being able to identify major trends which help increase your chances of pulling the trigger on a winning trade make swing trading the smart choice for traders.
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, there are two main tendencies you should look for in a stock if you plan to swing trade it.
First, the market must trend more often than not. Some markets are seemingly randomless and offer no explanation as to why they move like they do. Swing traders prefer markets that trend more often than not. This is necessary for you to be able to take slices out of the market with your trades.
Secondly, volatile markets are not suitable for swing trading. 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. Heavily traded markets are usually the best kind as they are typically not overly volatile.
Anyone can swing trade stock as long as they first make sure that it is one that tends to trend more than it moves sideways and that it does not move abruptly or erratically without explanation. Keeping this in mind will help you to gain an edge over other traders and be profitable at swing trading.
Swing trading would be made much easier if there was an indicator which could
indicate where and when markets were approaching turning points. Knowing when
markets were about to rally or retrace would make it easy to pick the perfect
entry points for your trades. Luckily, such indicators already exist and make
trading much easier. These indicators are known as momentum
indicators.
Momentum indicators are leading indicators and can warn of
possible future price movement before it happens. Put simply, they offer a
glimpse at future price movement before it has occurred. Momentum indicators
work on the basis of measuring a currency pair's level of momentum. As the speed
of change in price begins to slow down, momentum indicators alert you to this
change in speed or momentum and that a retracement of price may soon be
approaching. Momentum is essential to managing any trades you have by knowing in
advance where price may go.
RSI is one of the most popular and widely
used momentum indicators. 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. If a market moves into these overbought and oversold areas, more
often than not price will experience some kind of adjustment in the near future.
Knowing that an adjustment of price may happen, traders can close trades out
early and lock in profits before they are wiped away and lost forever in the
retracement.
If you are looking for someway to know in advance where
price may go, check out what momentum indicators. No other momentum indicator
comes close to the popularity of the RSI. 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 a
trader does not manage their trading funds correctly, as soon as they start
making profits many traders will begin to double or triple the size of their
trades. The main goal of this is to increase the speed and rate at which they
make a profit. 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. Swing trading should be done with money that is set
aside and specifically for trading. 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? I hope not.
Second, start
trading with small amount. There is no need to rush. The markets will be around
for years to come and you should be in no rush. What kind of small trades should
you being with? The answer to this depends on you, what do you feel comfortable
with. While trading, you want to focus on placing winning trades and not have
your judgement clouded by the fear of losing money. To avoid having this happen,
only trade with amounts that you feel ok with. You may even start trading
pennies at the beginning, but that is ok. The important thing is that you are in
control of yourself, your emotions and your trading.
The term psychology
here refers to managing yourself while trading. Trading usually brings out the
best and worst in people, more so when a trade they have just placed begins to
make a large profit or loss. It is these emotions that lead to some people
making hasty decisions as they are listening to their emotions and not making
proper decisions.
Why do many traders think trading psychology isn' t
important or it is a joke? Simply because people are scared that what they
uncover about themselves will cause them more pain than good. This is the same
kind of fear that ruins a good trade.
If you succeed at swing trading or
not depends on you as a trader. Are you mentally prepared to win or lose?
Changing your thinking is crucial to being successful in trading.
bravenet.com