Forex swing trading is a style of trading where traders try to profit from swings, or variations, in the market. It requires traders to hold a trade for several days at a time.
This style of trading falls somewhere between day trading and position trading. The primary difference between all three styles is the amount of time involved between buying an asset and selling it.
Here’s how it breaks down:
- With day trading, many trades are made in a single day.
- With swing trading, traders, buy and sell assets within days.
- With position trading, traders hold assets for long periods of time, like months or years.
Choosing which of these trading styles to use depends on several factors. First and foremost it would depend on the amount of time you can dedicate to trading.
Is swing trading for you?
Knowing if you’re suited to swing trading usually comes down to how much time you have for trading. Swing trading is ideal for traders who are looking to make a profit from short-term trading but aren’t able to monitor charts all day long. It’s also likely to suit traders who have full-time work or school but are able to keep up-to-date on what is going on in the global economy.
As a swing trader, you don’t need to be checking on the markets all day, so you can easily maintain a full-time job.
In comparison, position trading requires traders to hold an asset for a longer period of time, typically for a minimum of several weeks. This allows them to take advantage of general market patterns they’ve observed which could benefit them in the long term.
Even though swing traders don’t need an advanced understanding of technical trading and charting like day traders do, you should still be able to apply a combination of fundamental and technical analysis with some ease, rather than just technical analysis alone, in order to be a successful swing trader.
Finding your swing trading strategy
Swing trading strategies are based on fundamental and/or technical analysis that helps traders assess whether or not a specific currency pair will rise or fall in price in the immediate future.
Swing traders leverage a lot of historical data alongside current activity to determine what their best course of action will be. They use the data to analyse the peaks and troughs in the price of a particular asset in order to predict the future price motion that can generate a profit.
This analysis detects swings within a medium-term pattern. If you’re a swing trader, you’d place a trade only when there appears to be a strong possibility of gaining within the short-to-medium short term. Since trades last much longer than one day in swing trading, greater stop losses are needed to weather fluctuations. A trader can have trading go against them during the retention era, and there will be a lot of market swings in the shorter timeframes. So it’s essential that you’ve got a solid risk management plan, are able to stay calm, and stick to your strategy