Swing Trading

Definition:

Swing Trading is a term often employed to refer to a special method of trading in which the aim is to muster gains of a stock within a set time period of one to four days. Traders who employ this method of trading are more interested in the prevailing value patterns and drifts. The main objective is to collect the profits as soon as the market touches a certain high point.

A swing trader needs to be adept at the skill of technical analysis to formulate his strategy within a very short period of time.

The name swing trading is often used to refer to this type of trading because the currency pairs often reach their greatest potential only for a very short period of time and the trader needs to act immediately in order to be able to garner the gains.

Essentials for swing trading:

Swing trading is not as easy as the name implies. Following are a few things that a trader should know about before deciding to take a shot at being a swing trader:

1) Knowing about the points of resistance and support

To swing trade successfully, as a forex trader, you should have a profound idea about the point from where the cost of a certain currency pair can change. This might require you to draw lines on the currency pair chart that help join and pin point the areas of highs and lows for that particular pair. This will help you have a better know-how about the times of the year and conditions that made the pair’s price reach an all-time high and an all-time low.

As you continue to research the points of resistance and support, you will eventually end at a set of conclusions that will articulate the favourable conditions and times for swing trading.

2) Test your conclusions

Draw parallels between a number of different charts for the currency pair you wish to swing trade. The difference in the time period should be constant between each chart you compare. You need to check if the areas you have marked are constant throughout the years you are analysing or not. If the areas are same in different time periods, you can convince yourself of the reliability of the highlighted areas. After that, you need to wait to see if your investments give you your anticipated results. Following these steps, you will be able to identify the time when swing trading will be the most lucrative.

3) Application

You cannot learn how to swing trade overnight. Also, you cannot just make large profits by swinging for the first time. As this type of trading involves a lot of risk, the first few times might be hard for you as a swing trader, but consistency and the right strategy will make you capable of swing trading like a forex veteran over time.