Swing trading is one of the most discussed topics on Forex forums, in analyst reviews, and just a buzzword among beginners. Arguments are very different – from positive overclocking of deposits to complete denial. At the same time, losses are most often associated with non-compliance with the basic principles and lack of experience in Forex trading. However, if you do everything right, you can often be one step ahead of the others and make good profits.
Swing trading is a trading method that involves trying to capture price fluctuations that occur over short to medium time frames. In other words, the idea behind swing trading is to use the best time frame for swing trading and catch market fluctuations that occur from a few days to a few weeks.
Timing is an important part of trading
Modern software allows a trader to track and analyze various scales and length trends. Given these opportunities, a swing trader can build his tactics and strategy on different time frames, which can lead to different profit potentials and charting workloads.
If a trader is interested in high revenue but does not really want to watch the dynamics of the charts, then the choice may fall on the daily or 4-hour timeframe. For lovers of more active trading, 1-hour, 30- and 15-minute charts are suitable.
Having chosen a timeframe to determine the working trend, that is, the one in the direction of which transactions will be opened, the trader needs to remember that the entry timeframe will always be lower. For example, if your working timeframe is a day (D1), then the entry timeframe is 4-hour (H4), by analogy H4 – H1, H1 – M15, M30 – M5.
Benefits of Swing Trading
Compared to day trading, swing trading is less time-consuming. There is no need to monitor the situation throughout the session. This style makes it possible to make good profits regardless of the direction of the market. Compared to intraday strategies, swing trading allows you to get an impressive income.
It is worth noting that swing trading works only when the trader has a “flair”, and understands how to make money on a particular transaction. He must know how to find the “same” trend and trade competently.
Disadvantages of Swing Trading
Compared to intraday trading, swing trading uses larger time frames. This means that more money needs to be invested initially.
It is challenging for beginners to use this strategy. Its application assumes the presence of some knowledge, which allows you to determine the phase of the cycle for the market and the direction of the trend. Without basic understanding and skills, a trader will not be able to assess the possible risks and income.