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What is swing trading?
Swing trading (Swing Trade), also translated as Swing trading, Swing trading, is a medium-term trading strategy that takes advantage of price fluctuations to profit. Swing traders hold an asset for a period of time (one day to a few weeks) after making a judgment on price movements, with the aim of making a profit from price changes.
Swing trading strategies use basic or technical analysis to determine whether the future trend of a security market is up or down. Swing traders usually create a series of trading rules based on the collected information data, use technical indicators, search price fluctuation records, and look for the best opportunities to enter the market. Such traders are not particularly concerned with the long-term value of financial instruments.
If you compare the major trading types from a time perspective, swing trading is between two well-known strategies: Day trading (Day Trade) and Buy and Hold (Buy and Hold). Transactions. Day trading positions take less than a day, may be a few hours, or even a few seconds.
Day trading is considered one of the most speculative strategies because traders want to profit from short-term operations in the stock market. Trades will be sold at a preset price to hedge against any reverse movement risk that may occur during the out-of-town period.
Unlike day trading, buy-hold (also known as "trend") trading is a long-term trading strategy. Investors who use a buy-and-hold strategy have distinct characteristics. Some follow the cyclical rebound trend and invest in rising stocks that are closely related to global economic growth; Others focus on high-dividend stocks and invest steadily.
Each transaction has its advantages and disadvantages. Swing trading provides traders with a variety of trading techniques: more profit opportunities than intra-day trading; and stop orders can be used appropriately to reduce trading losses to acceptable levels. Swing trading has the potential to make quick returns, a feature that appeals to most active and motivated traders, as well as serving as an incentive to improve trading skills and raise capital.
Swing Trading Strategies and Techniques
How to conduct swing trading? Traders typically utilize several different swing trading strategies, and here are the four most popular strategies: Breakout, break, reversal, and retracement.
Breakthrough
The breakout technique is the method by which a trader takes a shot in an early uptrend, looking for the market or stock that is most likely to "break out. Traders will enter the market as soon as they see the desired volatility and stock price changes, which are generally the key points to "break" market support or resistance levels.
Fell below
A break strategy is the opposite of a break. When the stock price is below the support level and the chart moves downward, the trader monitors the same basic point as the breakout.
Reversal
The reversal strategy is mainly used to profit from the price change process when the stock price rises or falls at a slower rate and has not yet completed the reversal. This technique has a good risk-return ratio and is suitable for all types of markets.
Withdrawal
Much like the concept of a reversal strategy, a retracement strategy is primarily applied to price reversals within a general trend, but does not touch the highest point or any length of time. The share price temporarily returns to an earlier price point and then continues to move in the same direction.
What financial instruments do swing traders usually choose?
Swing trading is applicable to a wide variety of financial markets. Of course, each market has its own advantages and disadvantages. The choice of financial instrument depends on the trader's risk profile, level of experience and current market conditions.
Foreign exchange. When trading Forex, swing traders look for currency pairs that are moving significantly, with one currency moving up or down continuously relative to another.
Cryptocurrency. This relatively new class of digital currency has its ups and downs. Despite this, cryptocurrencies continue to attract a growing number of investors and traders across the globe. The most popular cryptocurrencies are: Ripple, Bitcoin, Ethereum and Tron.
Stock. Another application market for swing trading is individual company stocks. The principle of using a swing trading strategy is consistent with the general investment principle: swing traders buy stocks and hold them for a period of time, then sell them for a profit.
Swing trading helps traders diversify their investments. However, it is important to remember that each trading method has its advantages and disadvantages, and it is up to the trader to judge and choose which trading strategy to use on a case-by-case basis.