Swing trading: what is it and why is it so popular?

The essence of swing trading

The concept of swing trading is quite simple in itself: it is a short-term trading strategy in the financial market, where the decision is made depending on fundamental and technical factors that indicate the direction of the trend. In this case, a trend is understood as a trend that can be traced in exchange rates from several days to several weeks. Swing traders as advise TheTradable pay great attention to technical analysis, because it is he who can help to recognize a particular price swing. Thus, the swing trader is more focused on profit from price jumps than from long-term trends and the corresponding asset value.

The benefits of swing trading

When it comes to swing trading, everything looks clear and simple “on paper”, but in fact it is a very risky strategy. However, where there is risk, there is usually a good profit. Swing trading has many advantages that make it possible not to miss a profitable opportunity and differentiate it from other trading methods.

Ability to not depend on time

Many trading strategies in the financial market require the constant presence of a trader and work for a large number of hours. In swing trading, the opposite is true: the trader is not tied to a specific time and is relatively free to choose the "window" during which he can trade. Thus, you can enter the market only during certain hours, in the periods between trading sessions or during the day.

Clear boundaries

The trading process should be clearly limited to certain limits, and although some strategies allow a certain liberty in this regard, in swing trading this rule is spelled out in golden letters. Since swing trading is based on technical analysis, the process of monitoring and controlling trades becomes much easier. In particular, it becomes much easier to understand when a trade is going down and take appropriate action.

Smaller stop loss

In swing trading, the stop loss is small, especially when compared to long-term trades. For example, when trading on a standard four-hour chart, stops can reach 100 points, while on a weekly timeframe, they reach 400\. Thus, with a large potential profit, swing trading can significantly reduce risks without bringing them to the gigantic amounts accepted in the long-term. trade.

Quick entry and exit from the market

Swing trading also implies freedom to enter and exit the market without much fuss and problems. You can trade on almost any timeframe, focusing on patterns and important levels such as support and resistance, respectively, making a deal on time and then “closing”. Thus, you can make a quick profit by concluding a couple more deals along the way, and then take a break - there are very few strategies where this approach will work.

The ability to follow the market

The Forex market is constantly in motion, although this may not be visible at first glance. Movements occur in one direction or the other, and this is what swing traders use: they follow the "waves" of the market, buying when prices rise and sell when prices fall. Thus, swing trading does not “lock in” the trader in a particular type of market, giving freedom of action.

Summary

There are traders who are willing to wait and endure for the sake of profit, but others need results here and now. Swing trading is suitable for the latter, where it is about observing market movements, and not just waiting for the price to finally go in the right direction. In general, swing trading is very popular among traders due to the ability to control the situation, trade actively and, most importantly, significantly increase the potential profit.