Swing Trader Meaning
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If we talk about one trading form that is ideal for beginners, choosing a swing trader holds paramount importance. It’s a slower-paced trading form that contains a considerable profit potential for new traders.
Swing trading is a short trading form in which a trader can hold the trades for either one day or at least one whole week. Swing traders generally follow technical analysis for implementing this strategy to enter or exit from the market.
Overview: Swing trading
Swing trading can survive for an unlimited period which can be either one day or one week. Therefore, swing trading has a massive focus on technical analysis to keep track and determine its market movements.
Is swing trading and day trading similar?
Well, at a certain point, both swing trading and day trading are similar to one another to a certain extent. This is because both trading strategies are based on technical data for analysing historical price trends. This can help a trader to predict the future price of their assets.
Nevertheless, there is a slight difference between these two trading techniques!
The swing trading approach is all about buying and holding the assets overnight. In swing trading, the time frame is restricted to either a few days or weeks.
On the other side, day traders generally work to exploit the intraday price movements. They sell the assets within a schedule which is close to the trading day.
List of tools and technical indicators used by swing traders
Few primary tools you can find in a swing trading toolbox are charting technical indicators and stock screeners. Apart from these three, a variety of other tools and indicators are also used by swing traders discussed below:
1. Stock Screeners
If you want to acquire an incredible trading opportunity, it is essential to follow your trade strategy and take advantage of it carefully. You can find a variety of stock screeners available in the market for your swing trading journey.
The screener is also used to compile a list of those assets that can meet your requirements and display specific swing trading characteristics.
2. Candlestick Charts
Next, we have Candlestick charts which display four points of data for each of the candlesticks. This includes high, open, close, and low prices throughout the candlestick period.
Data displayed by the candlestick charts are valuable for the traders to determine the historical and future price movements.
3. Moving Average Crossovers
Moving average crossovers are caused by short-term moving averages crossing above or below their long-term peers. A trader can also use them for determining the exit and entrance points.
4. Stochastic Oscillator
This indicator of stochastic oscillator assists the trader in knowing if the asset has been oversold or overbought. If the indicator reads under the level of 20, it means that the asset is moved into the oversold territory.
If the indicator reads over the level of 80, it means that the asset is moved into the overbought territory.
5. On-Balance Volume
Last we have On-balance volume, also known as OBV. This indicator uses the trading volume changes to predict the future movement of prices. If the OBV is increasing, it means that the demand for assets is also increasing. Upward movement is shown.
If the OBV is decreasing, it means that the demand for the asset is also decreasing. Therefore, downward or decline movement is shown.
Pros & cons of swing trading
Now let’s discuss the pros and cons of swing trading one by one for a better understanding of this strategy:
- Swing trading is easy to apply on different assets. This technique is not just restricted to using assets for trading. It is equally popular among commodities, forex, or exchange-traded funds (ETFs).
- There is a huge potential for this strategy to beat the trade market. With a bit of research, you can find numerous traders who have gained massive profit and have beat the market average through swing trading. But this is only possible when it is done accurately.
- There is no space for emotions at all. By following an accurate swing trading plan, a trader knows entirely when to trade, when to exit a market, when to enter and how to control market prices.
- Swing trading involves detailed technical analysis, which makes it a time-consuming technique to deal with. It generally starts appearing to be a full-time job for a trader, which is not easy to handle.
- In swing trading, a trader always tries to follow near-term trends, and in this effort, they miss some long-term opportunities for generating significant returns.
Practice before you utilise swing trading
Like any other trading form, swing trading is a speculative one, and it comes with some increased risks compared to long-term investing.
As a new trader, it is essential to start practising your basic strategies before risk yourself into swing trading. Not following the right approach can lead you to lose your hard-earned money in just a few seconds.
You can look for various free trading simulators available online. Brokerages also offer demo accounts through which you can learn the basics of swing trading and how to work with it.
To sum up the whole discussion, we will say that swing trading is for sure an effective trading style to get your feet into the world of trading. Moreover, it offers some significant potential for advanced and intermediate traders.
Traders are always looking for massive trading opportunities daily. And swing trading is made possible because it monitors the market movements. As a result, it generates plenty of plaudits between traders after increasing trading activity, control, and profit potential.
Jason Morgan is an experienced forex analyst and writer with a deep understanding of the financial markets. With over 13+ years of industry experience, he has honed his skills in analyzing and forecasting currency movements, providing valuable insights to traders and investors.
Forex Content Writer | Market Analyst