Swing trading is a style of trading that can be adopted for profit-making. It attempts to capture short-to-medium term gains in a financial instrument over a period of few days to several weeks.
If you are trying out this style of trading, then you should know how to utilize technical & fundamental analysis.
In this post, we’ll discuss learn about swing trading and how it works. Before then, let’s know what forex trading is all about.
What is Forex Trading?
Forex trading is a term used to describe a group of people engaged in the active exchange of foreign currencies, most times for financial benefit or profit. Sometimes, they can be in the form of speculators looking to leverage the fluctuations in the price of currencies. They can also be a hedger protecting their accounts due to an adverse move against their currency positions.
The term ‘forex trader’ may describe an individual trader on a retail platform, a bank trader utilizing their institutional platform, or hedgers managing their own risk or outsourcing that function to a bank or money manager to manage the risk for them.
What is Swing Trading?
Swing trading is a trading technique that involves taking trades (forex, stock, etc.) that last a couple of days up to several months. This is usually done to make profit from an anticipated move.
Basically, swing trading involves holding a position either long or short for more than one trading session. It is also the process of identifying where an asset’s price is likely to move next, entering a position and then capturing huge profit if the move materializes.
Things To Know About Swing Trading
1. A major tool for swing traders is analysis. Technical analysis is utilized to look for trading opportunities. Analyzing price trends and patterns is also key.
2. The duration for this type of trading is usually not longer than several weeks or two months. In some cases, it can be more than a couple of months.
3. Swing trading can occur during a trading session as a result of extreme volatile conditions.
4. This style of trading exposes a trader to overnight & weekend risk, where the price could gap and open the following session at a substantially different price.
5. Successful swing traders always capture a chunk of the expected price move and then move on to the next opportunity.
Advantages of Swing Trading
1. It requires less time to trade than day trading.
2. It maximizes short-term profit potential by capturing the bulk of market savings.
3. With technical analysis, traders can simplify the trading process.
Disadvantages of Swing Trading
1. Trade positions are subject to overnight and weekend market risk.
2. Abrupt market reversals can result in substantial losses.
3. Swing traders often miss longer-term trends in favor of short-term market trends.
Swing trading is a style of trading that can be adopted for profit-making in forex. It is different from the common day-to-day trading as it could take weeks or months.
You need to understand the nitty-gritty of this type of trading before utilizing it.
Also Read– How to Avoid Losing Money in Forex