Swing Trading | One of the Major Trading Styles Used

Swing trading is one of the four major trading styles used by investors. It refers to investments with asset holding periods lasting from over one day and up to several weeks. It is considered a less demanding alternative to day trading for many who do not necessarily see online trading as a full-time job. Many investors use this trading approach because they appreciate longer time frames between the execution and the closing point of a trade order. 

Swing trading assets

There are no limitations on asset selection when it comes to swing trading. This style can be used to trade FX pairs, commodities, or stocks. Traders use analysis to identify assets that show potential short-term momentum. Based on the analytical findings, they will then execute an order and normally hold their position either overnight or for less than a week. The capital needed for swing trades depends on the assets the investor decides to trade. 

Momentum explained

Regardless of the trading style used, every single action that takes place in online trading is heavily affected by the momentum of the market. Investors use analytical tools in order to identify trend indications and estimate if an asset’s price is building an upward or downward momentum. Depending on that momentum, they then adjust their trading strategies, but even when using analytic tools, outcomes cannot be guaranteed. 


Is this style for you?

Swing trading may be an attractive style for both those who new to online trading, as well as those who are looking for a more relaxing trading approach. It allows for a gradual immersion in the world of trading, as the investment in trading assets can be done in parallel to primary occupations. It also minimizes the risk of trading on impulse, which helps avoid trading mistakes. 

Unlike scalp or day trading, this style does not require spending every moment to manage positions. A couple of hours of analysis per day would likely be enough to feel that you have prepared yourself for a swing trade. Make sure you use the analytical tools of trading platforms such as MetaTrader, to create the most effective trading strategies. 

Enhancing trading strategies with technical analysis

Because of the short-term nature of swing trading, investors prefer to use technical analysis to improve their strategies. Mathematical approach for making predictions about prices helps to cast away some emotional considerations and subjective ideas about the situation on the market. Instead, it allows focusing on statistics, that reflects actual price fluctuations, volume of trades, strength of asset positions. The common use of technical analysis does not mean that fundamental one is not suitable for swing traders. The latter may help to identify market trends, which makes it a smart addition to the data received from technical analysis. 

Things to keep in mind

Swing trading can be used in parallel with other trading styles, and just like with any other type of investment, it comes with both risks and opportunities. You will need to apply both technical as well before executing an order, identifying the most appropriate entry and exit points. Setting a realistic profit target and stop-loss on a trade can positively impact the outcome of an investment, though predictions, even when well-thought-out are never certain.

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Written by:
Omer Aragón Godínez

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