The swing trading strategy is one of the most basic forex strategies. If you have heard of this strategy and want to learn more about it, this article is perfect for you. Here, I will explain to you what swing trading is, how it works, and what type of trader it suits best. Now let’s go.
What is swing trading strategy?
To put it briefly, swing trading strategy is a trading style that lasts for long and requires patience from traders to hold their positions for up to days. It is suitable for traders who don’t have time to keep up with the charts during the trading day but can spend hours analyzing the market and giving predictions at night. These people are usually those who have full-time jobs or still go to school. They only have a few hours a day to stay up-to-date with the market trends and current economic situations.
How does swing trading work?
Swing traders will look for “swings” in a relatively medium trend. Only when there is a high chance of winning do they decide to take part in the market.
When they see an uptrend, they will go long (buy) at the low part of the swing and go short (sell) at the high part of the swing. Their aim is to take advantage of temporary counter-trends.
When you try swing trading strategy, your trades regularly last to days. Therefore, you will need to set larger stop losses in order to overcome volatility. Pay attention to that and put it in your money management plan.
And of course, sometimes you will encounter trades that go against you when you’re holding the positions because the price of a currency pair can be very fluctuated during the shorter time frames. So it’s vital for you to remain a cool head. Have faith in your analysis and predictions.
Swing traders don’t care about spread because they are aiming at a very large amount of money. They are ready to trade with pairs that have high spread and low liquidity as long as they are easy to analyse. Still, it’s better to trade with the lowest spread brokers.
What does it take to be a swing trader?
You’re ready for swing trading strategy when:
- Holding your trades for many days is not a problem to you.
- You don’t care about your number of trades. You can take time to carefully set up a trade.
- You’re okay with large stop losses.
- Patience is one of your best qualities.
- You’re not easy to lose it when trades don’t go your way.
Swing trading strategy is not for you when:
- You want to trade and make money quickly.
- You want to know whether your analysis and predictions are correct immediately.
- You easily panic when your trades go against you.
- You don’t have a few hours a day just for analyzing the market.