PostHeaderIcon Swing Trading Basics

Trading ChartsThere are many strategies that people use to trade profitably. It just happens that some find great success in a certain method that they have learned to use over the years. It all depends on what a certain trader can cope up with in terms of his or her own tolerance levels when it comes to risks. And there are also methods that work well for something in between extremes. One such method is swing trading.

By putting it simply, swing trading is a trading practice wherein a financial instrument is either bought or sold at the end of an up or down price swing. This type of trading method usually looks after certain trends over a specific period of time. A typical swing trading practice is by buying a certain security, hold them for a few days and then close the position after its price has risen in a few days.

Swing Trading Philosophy

Swing trading usually takes advantage of human psychological and emotional characteristics when trading. Price fluctuations in most markets are usually brought about by either fear or greed. But in most cases, there are also certain uncertainties in between.  It is the aim of a swing trader to sell into strength and buy into weaknesses. In order to do this, it is a must for a swing trader to determine the probability of how prices will behave and identify the turning points. It is somewhere during these turning points that swing traders try to take advantage of. Swing traders usually hold positions in just a matter of days or weeks.

Swing Trading Advantages

 An advantage of swing trading is that it may not be as stressful a method as those used by day trading. Swing traders can take it easy by holding positions for a matter of days while day traders usually have to monitor price changes all day long. Swing traders also have the advantage of beginner and novice traders working for them. Another advantage of swing trading is that it is a strategy that can be used by traders who usually do not hold high volume trades most of the time. Swing traders also benefit from limited risk by not holding into positions for too long most of the time.

Swing Trading Disadvantages

Along with most other trading methods, swing trading may also have its disadvantages. One of the disadvantages of swing trading is that it does not usually work in cases where the situation involves a sideways price movement. Another disadvantage is that swing traders have to be more exact with their moves. In markets that usually are hard to predict, being exact most of the time can be quite a challenge.

Swing traders need to know beforehand the exact instrument they wish to buy, determine the stop loss limits in case it fails and exactly know when to sell for profits. In order to do this, it takes quite a bit of knowledge and experience about probabilities since market indicators are unpredictable most of the time.


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