Swing Trading Strategy
We can answer the question of what swing trading means as: "A trading strategy aimed at profiting from short to medium-term price movements using technical analysis." Swing traders try to capture the fluctuations (price swings) that occur in the markets.
Unlike day traders who make numerous trades and close all positions at the end of each day, swing traders look for larger movements and hold their positions for a longer period.
Understanding Swing Trading
The fundamental principle of swing trading arises from the fact that markets rarely move straight up or down. Instead, they swing back and forth as they reach their destination. Along the way, they create higher peaks and higher troughs in an uptrend and lower peaks and lower troughs in a downtrend. This is due to the market psychology that creates natural swings as investors and traders continuously move and react.
Short-term analysis is critical when it comes to swing trading. Instead of looking at primary trends over months and years, swing traders focus on shorter trends over weeks or days. Surface-level analysis helps evaluate the position you need to hold. From here, making the right timing within a specific window can be as simple as that.
As you might expect, this makes securities with a stable trend undesirable. On the other hand, speculative or trending assets are quite compatible with the instantaneous nature of swing trading. Candlestick charts, price history, and resistance levels are just a few of the methods that can help create a forecast for the outcome of a trend. When the desired price movement is achieved, a swing trader can stop holding and sell their position.
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