Swing Trading: Ways to Be a Successful Swing Trader
Swing trading has become even more popular with people looking for ways to get in some extra income. Swing trading is a type of trading where traders hold a position for more than a day. This active trading style captures the swing in the market sentiments and lets you enter/exit a position at both levels. With swing trading, the trading strategies are driven mainly by technical analysis.
What Is Swing Trading?
Swing trading refers to a trading style that involves holding a position for anywhere between a couple of days and weeks. It lies in between day trading and trend trading. Day traders keep an asset from a few minutes to some hours but not over a day. Trend traders examine the long-time fundamental trends and hold an asset for some weeks or months. However, a swing trader may keep a specific asset for a time ranging from a few days to a few weeks. They generally trade the assets on intra-month or intra-week oscillations between pessimism and optimism.
Traders look to make the best from downward and upward “swing” in an asset’s price. They look to capture small moves in a large overall trend and intend to make many small wins that can add to noteworthy returns. Most of the swing traders use the daily charts to select the best entry/ exit positions. But some of them may also use a shorter time frame chart like 4 hours chart or hourly chart.
Which Are the Swing Trading Methods?
Different swing traders use various swing trading methods and strategies. Below are the most common ones:
Retracement trading includes looking for prices to reverse temporarily with a bigger trend. A price can temporarily retrace to a previous price point. Later, it will continue to go in the same route. Sometimes, reversals are hard to predict and differentiate from a short-term pullback. While a reversal refers to a trend change, a pullback refers to a mini-reversal during a current trend.
Reversals begin as a potential pullback always. However, the challenge is knowing whether it is a pullback only or a trend reversal. If it is a retracement, the price going against the initial trend should be relatively brief and temporary.
Support & Resistance
For those who follow the trends, support and resistance are the most vital indicators. In swing trading, support recognizes the bottom levels of trading ranges, and resistance refers to the ceiling. The price of an asset moves in this range. However, if the price crosses the resistance or support levels, it denotes a reversal. The region below support is where overselling takes place. The price that goes over the resistance level is recognized as an overbuying situation. It indicates that the buying pressure will finally decline, and selling will take over.
Investors use a T-line of charts to decide the best time for entering or exiting a trade. If a security moves above this T-line, it is a sign that the rate will rise constantly. If the security goes below this T-line, the price will fall continuously.
Bollinger Band Method
A Bollinger band is a price band placed on both sides of a trend line. It helps to create a range between the asset’s price moves. The swing traders use these bands to plan entry/exit points within the market.
It is an easy way involving trading assets that show a solid trend line with trading in a channel. When using channels, you should trade only with the trends.
How to Become a Successful Swing Trader?
By studying and incorporating the following swing trading tips in your current market framework, you can learn to become a successful swing trader.
Short Weakness And Long Strength
Look for suitable short trades during the period of bearishness. Find a long trade during the period of bullishness.
Use the News
The markets are continuously moving according to the news events. Lots of resources offer commentary and market analysis using price action, weekly charts, and volume. If used properly, the news can assist in highlighting prospective options and assets to keep your eye on.
Align your Trades with Market Directions
While discussing trends and trades, start with the primary and interim trends of the market. The trends can provide the perspective for all traders to make trading decisions for the short-term. Recognize the long-term trends to ensure that you move with the flow.
Apply “Multiple Indicators” Rule
A highly profitable trade occurs when every available technical tool gives the same message of a rise in the price of an asset. Keep in mind that there is no magic for profitable trading, and there is nothing like free money. Only technical analysis can boost the chances of making the right swing trading decision.
Enter Trades With Clear Plans
Swing trading can result in impulsive buying. However, with clear plans, you are trading, not gambling. Preservation of the capital is vital. So, set up a stop-loss always. It is best to set a stop loss before you make a trade.
Integrate Fundamentals in Technical Analysis
Swing traders hold positions for many days to many weeks. So, they largely advantage from better understandings of fundamentals.
Enter Trades in The Beginning
The faster you identify a trend in the trading world, the more profitable and successful a trade will be. Pay attention to the market averages. When these are oversold or overbought, they are prone to reversal. If a market is testing the zone of resistance and support, look to new lows, highs, and the decline/advance line.
Manage Time Like Price
Time is indeed money when it comes to financial markets. Know your hold period for each trade. Keep a watch on the clock to be a market survivor.
Control Risks Before Getting Rewards
Wear the market chastity belt always. Attention to profits is a symbol of immaturity. And attention to losses refers to experience. The market has no intention to offer profits to those people who do not earn them.