There are several options for trading forex depending on the average duration of the trade - short, medium and long term. Each of the time intervals has its peculiarities of work. As for swing trade definition, it is a way of trading using rollback (correction) moments that arise in the process of trend formation. It is characterized by using day/week timeframes and strict adherence to risk management. But preparation for the opening of a new trade requires some time for a detailed analysis of the prevailing trends and the construction of forecasts for the probability of reversal.
There are not many traders using this strategy, mainly large players who use only their deposit or small leverage.
Risks during trading on this strategy will be minimal, as the work is done on medium- and long-term timeframes. Therefore, the market noise and news background will not interfere with you.
Speaking about the advantages of swing trading, we can distinguish the following:
Getting profit is possible in any layout, general market direction.
It doesn't cause much emotional tension.
Strength, energy and time consumption are minimal.
High chances of huge profits.
How to Swing Trade Forex
Unlike day trading, swing trading takes less time you do not need full time and half a day to look at the monitor. At the same time, there is a significant potential for profitability for the average trader. The average position is held for about 4 days, although it can take 2-3 weeks. Swing traders, as a rule, are guided by technical analysis to open-close a position.
Swing trading is not a trading strategy, as some believe. It is simply a separate style or type of trading, as well as day trading or position trading. To, as you will enter and exit a position, manage risk and maximize your capital, and will constitute your swing trading strategy. The basic principle of swing trading is as follows: you trade the asset towards a long-term trend, but only after there is a wave of positions against this trend. In other words, a swing trader trades a reversal of the price of the asset to the main trend. This is the main concept. For example, a long position should be opened on an upward trend, after a sales wave has occurred.
We enter a short position if there is a buying wave in a downtrend. This is the safest way to open a position that we know of.
Is It Possible to Swing Trade in a Bear Market?
Swing Trading does work in bear markets, but it will generally be a quite troublesome venture. You have to take into account huge market fluctuations, which unquestionably may be in your favor, but will need you to set bigger stop losses.
Now let`s have a look at 3 trading options in a bear market. Which one you should pick depends on how certain you feel about your trading approach, as well as on individual preferences.
Toughen criteria for placing trades. This method is often used by traders and covers more scrupulous about the signals you work on. While you may feel prone to take signals that are common during a solid bull market, that should change when you face a bear market. You just don’t have the constant positive energy to stop you.
The next one is to simply halt swing trading and keep away from the market. This might not seem like the most enthralling prospect but could satisfy those who:
They are very uncertain that their tactics will be able to tackle a bear market. Possibly for their strategies have just been tried on bullish market situations.
They are not able to emotionally manage the going into a market that seems to be collapsing, among gloomy media and news releases. Only following this counsel will save you a lot of money!
Trade Smaller Positions
If you’re hesitant about whether you should proceed to trade or not and don’t want to totally abandon the existent trading plan, you could alternatively choose to trade with a smaller position size than you would commonly. This has advantages like decreasing your emotional anxiety levels and allowing you to take advantage of the market and decreasing the chances of going broke at the same time.
Generally speaking, reducing your position size is an excellent plan when you get into unknown territory that might need some testing to infuse confidence in your methods.
Swing trading is, in fact, one of the best trading styles for both novice and experienced traders. It offers significant potential for profit to participants. Swing traders gain sufficient dynamism in their trades while minimizing risks to a reasonable extent. Of course, for large market players swinging may just seem too small, but for those who do not have a large initial capital, this trade has great potential. If, of course, a trader can catch the market trend and hold a position, exactly as long as it is required, without succumbing to the mood of other market participants. Those who will understand the specifics of swing trading will devote enough time to improve the analysis of the market and its dynamics, as well as those who can develop a trader or investor intuition, swing trading can bring profit and success in any market.
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