The process of swing trading has become a very popular stock trading strategy used by many traders across the market. This style of trading has proven to be very successful for many committed stocks and Forex traders. Traditionally swing trading has been defined as a more speculative strategy as the positions are traditionally bought and held for the traders predetermined timeframe. These time frames could range anywhere from two days to a few months. The goal of the swing trader is to identify the trend either up or down and place their trades in the most advantageous position. From there the trader will ride the trend to what they determine as the exhaustion point and sell for a profit. Often times swing traders will utilize many different technical indicators that will allow them to have a more advantageous probability when making their trades. Shorter-term traders do not necessarily tend to swing trade as they prefer holding positions throughout the day and exercising them prior to the close of the market. Swing trading strategy utilizes time and it is this time that is the deterrent factor for many day traders. Often times there is too much risk involved with the close of the market and that a trader will not be willing to accept this risk.
The distinction of swing trading is a broad topic in that it has many different influences from a multitude of different trading strategies. All of these trading strategies are unique and have their respective risk profiles. Swing trading can be an excellent way for a market participant to further enhance their technical analysis skills while giving them an opportunity to pay more attention to the fundamental side of trading. Many successful swing traders have been known to use a bollinger band strategy as a tool to assist them in entering and exiting positions. Of course, for a swing trader to be successful at the strategy, they will need to have a high aptitude for determining the current market trend and placing their positions in accordance with that trend. It does a swing trader note good to place a short position with the plan of holding for an extended period of time in a market that is clearly trending upwards. The overall theme here is that the goal of the traders should be to increase their probability of success while limiting or eliminating risk completely. The swing trader’s worst enemy is that of a sideways or in active market. Sideways price action will stop a swing trader cold in his or her tracks as there is no prevailing trend to key off of.
When used correctly swing trading is an excellent strategy used by many traders across various different markets. It is not only used in the Forex market but it is a key tool in futures and equity markets. Swing traders take the skills that they learn through technical analysis and can even parlay these skills into various options strategies. The short-term nature of swing trading sets it apart from that of the traditional investor. Investors tend to have a longer-term time horizon and are not traditionally affected by short-term price fluctuations. As always, one must remember that swing trading is only one strategy and should be utilized only when appropriately understood. Like any trading strategies swing trading can be risky and conservative strategies can turn into day trading strategies quite quickly. If you plan to employ a swing trading strategy, ensure that you fully understand the risks and develop a strategy that will be able to allow you to generate maximum percentage returns on your positions.