SWING TRADING AND WHO IS A SWING TRADER
Trading the financial markets whether stocks or crypto involves various methods and strategies.
As some will see it as a side hustle, some see it as a way to earn a living.
No matter what you see it as , the important thing is to be sure you’re doing it right , and staying profit as a trader.
A DAY trader focuses on actualizing profits daily which is something very nice as he tends to hold profits based on his or daily activities .
But I believe you’ve heard words like SWING trading.
SWING TRADING
SWING Trading is the trading style that requires holding trades for medium or a very long time. In essence, it requires holding for at least more than a day to weeks or months depending on price targets and trading methods.
It is a trading style that requires patience to be able to hold your trade positions for several weeks till it meets your target or at least 80% near the target.
SWING Traders identify a possible trend and then hold the trades for a period of time, from a minimum of two days to several weeks or months as the case may be.
This trading method is ideal for those who can’t monitor their charts throughout the day but can dedicate a couple of hours analyzing the market and also have enough free time to stay up to date with what is going on in the global economy.
CHARACTERISTICS OF A SWING TRADER
- Holding Trades for several days.
- Willing to take few trades and patient enough to wait for trades with the right set ups.
- They have large Stop losses.
- Patience and Discipline.
- Maintaining Calmness when trades move against you.
- Spends hours analyzing trades properly.
TYPES OF SWING TRADING
Yes , many people say they’re SWING traders as they see the high rewards these traders get and they want it , but even if you’re patient and still possess all the characteristics of being a SWING trader, position yourself properly under one of these positions to be able to trade the swings properly
Here are the four most popular types of SWING Trading;
- Reversal Trading; Reversal trading generally refers placing your trades based on effects of change in trend direction. This is clearly seen in cases when price looses momentum from an upward trend and starts to move downwards. Note that ; a change in price momentum can either be positive(bullish) or negative(bearish). Which ever way it is , this method trades the change in price momentum
- Retracement Trading; This involves trading a temporary pullback within a larger trend. In this case, price temporarily reverses to a previous price point before it continues with the original trend. Reversals are sometimes hard to predict and to tell apart from short term pullbacks. While a reversal shows a change in trend, a pullback is a shorter movement within an existing trend. If it’s a retracement , price moving in against the primary trend should be temporary and relatively brief.
- Breakout Trading; Breakout trading is a method of swing trading that involves setting trade orders directly above a strong resistance zone . As known by traders , resistance zones are majorly sell zones. So this method of swing trading involves placing trades directly above those zones and using indicators for new price targets.
- Breakdown Trading; This is the direct opposite of Breakout Trading, in this method of swing trading you place orders on the early side of a broken support , in essence you expect price to dump from there because as expected price is supposed to move up from there but reverse becomes the case when these points are broken we expect a move to the downside. So this is also particularly known as downside Breakout.
Pros and Cons of SWING trading
Many swing traders assess trades on a risk/reward basis. By analyzing the chart of an asset they determine where they will enter, where they will place a stop loss, and then anticipate where they can get out with a profit. If they are risking $100 per share on a setup that could reasonably produce a $300 gain, that is a favorable risk/reward ratio. On the other hand, risking $100 only to make $75 isn’t quite as favorable.
Swing traders primarily use technical analysis, due to the short-term nature of the trades. That said, fundamental analysis can be used to enhance the analysis. For example, if a swing trader sees a bullish setup in a stock, they may want to verify that the fundamentals of the asset look favorable or are improving also.
Swing traders will often look for opportunities on the daily charts and may watch 1-hour or 15-minute charts to find a precise entry, stop loss, and take-profit levels.
Pros
- Requires less time to trade
- Maximizes profits by capturing market swings
- Traders can rely exceedingly on Technical analysis simplifying the process
Cons
- Trade positions are exposed to weekend market risks
- Sudden market reversals can result in substantial losses
- SWING Traders often miss shorter term market moves as they always wait for the major move in the long term.
SWING Trading Tactics
A swing trader tends to look for multi-day chart patterns. Some of the more common patterns involve moving average crossovers, cup-and-handle patterns, head and shoulders patterns, flags, and triangles. Key reversal candlesticks may be used in addition to other indicators to devise a solid trading plan.
Ultimately, each swing trader devises a plan and strategy that gives them an edge over many trades. This involves looking for trade setups that tend to lead to predictable movements in the asset’s price. This isn’t easy, and no strategy or setup works every time. With a favorable risk/reward, winning every time isn’t required. The more favorable the risk/reward of a trading strategy, the fewer times it needs to win in order to produce an overall profit over many trades.
CONCLUSION
Notably, the fact that many traders wishes to be a swing trader as it allows you to be able to do other things while you trade as well is something that traders need to know what swing trading really is ,
Also getting to know that there are things and characteristics that day traders possess that gives them an edge over swing traders is also something.
If you’re a swing trader, understand that you need to employ the above characteristics and must have patience to be able to function well.
NB; You can become a swing Crypto trader with a small account as you’ll need to hold up your positions to avoid liquidation.
