A longer-term approach to forex trading is known as swing trading and it makes a popular choice with part time retail investors as you don’t have to stare at a screen all day to do it right. In this article we’ll explain what swing trading is, what’s involved and help you figure out whether it’d suit your forex trading style.
What is swing trading?
Swing trading is a forex trading style where a trader will take and hold a position for a matter of days or weeks, looking to capitalise on a short-term market reversal (or swing, hence the name).
As with day trading it involves a lot of analysis and understanding of technical ideas, some of the most useful concepts being support and resistance, moving average and candlestick patterns. You’ll also need to have a few sound approaches and strategies to help you predict the swing such as trend or counter-trend trading, momentum and breakout trading.
Don’t be fooled by the infrequent nature of your trades. This might be a longer-term play but you’ll still need to find a few hours each day for your analysis of the markets. On the other hand, you don’t have to commit to being glued to your screen at the same time each day for a period of a few hours. A potential disadvantage of this approach is that it does expose you to the occasionally massive shifts that happen in your position overnight.
Who does swing trading suit?
If you’re a part time trader looking for a trading style that’d sit well alongside the need to actually focus on a well-paying day job, this might be one for you.
You need a reasonable appetite for an amount of risk per trade, but for many this approach is a nice balance between the intensity of scalping or day trading and the long range insight required to make money as a position trader, providing enough day to day activity to retain their interest but without requiring a “day job” level of commitment
If you enjoy analysis and learning more about different techniques for looking at data, different trading strategies etc. swing trading can really work well for you as the better educated the trader, the more often they’ll be able to capitalise on the full range of the swing.
Who should steer clear of swing trading?
If you’re looking for an approach that allows you to make a bit of money but doesn’t involve hours spent staring at data and charts then this isn’t your bag. It also doesn’t allow a trader to leverage deep levels of understanding of long range economic and political forecasts, the interplay between different world events etc.
There’s also a high degree of risk per trade as you’re making less of them over the course of a year and the impact of one poor decision will be far greater than if you were scalping or day trading. For some people this works as they’d rather put more effort into each decision and have it count for more, but for many this feels very scary as a larger amount of your capital is at risk in every trade.Tags: trade