Swing trading is a profit method in which a trader catches the trade from the higher lows and lower highs. Such trades always remain highly profitable if trader catches such trade in the right way.
Especially in the trending phase swing trades provide a high risk to reward ratio.
IT is the most profitable trading method in the market as it offers on the key points.
In day trading positions remain open for a day but in the swing trading positions may remain open for the longer time period may be from a day to a week.
If we observe holding time then we can find that swing trading positions remain open from two days to six days. This is one of the major reason to choose this trading method.
Swing Trading and Trends
In swing trading traders focus on profiting from the changing trend. Especially in the bull trend when buying pressure is over and price printed a higher low near the immediate support area.
And in the bearish trend when price print a lower high near the support area.
Even traders who are professional in this field with the use of fibo they catch the swing highs and swing lows in the same trend which is more profitable but not recommended for everyone.
It is a profitable trading method and swing traders use a variety of technical indicators and tools to identify the patterns and trend direction as well.
That helps a trader to identify potential trades and change in the real trend.
All in one Trading Method
Swing trading can be used for any asset class like for stock trading as well as for forex and futures trading. Identifying the overall trend and finding potential trades remain easy with swing trading.
Trading cost may be higher in some asset classes.
Here is a simple and wise list of swing trading strategies which you can use on any asset. It is important to identify the key time frame that swings trade unfold which is possible with effective monitoring. Obviously, it will maximize the earning potential.
How Swing Trading Works
A trader prefers swing trader over other trading strategies for the purpose to identify the overall trend to capture swing trades within that trend.
Majority of swing traders prefer to use technical analysis because it offers to trade with more accuracy.
I find that the majority of successful swing traders work only with the main trend as chances of winning remain higher in bigger trend.
A successful swing trader uses higher time frames like H1 and above because of that print more accurate signals. Higher time frames also provide the opportunity to ride the full trend.
Swing trades always sees to capitalize on the price movement in a trend is not the strategy for ranging market.
So, when you are in there at very first you need to identify the main trend and then the real levels in that trend. If you set it there figure out the swing highs and swing lows the expected levels.
This working will help you to make your trading plan, once you figure it out you can lay out your complete trading plan with the money and risk management.
Instead of a significant trade swing trader prefer to collect small winning. They become able to earn well with small average but a greater number of trades.
Small moves in the swing trading always keep a trader away from the suffering of big stop losses.
Swing Trading and Ranging Market
Many times, we observe that there is no trend price just move between two parallel lines. Like when it reaches to upper line it reverts back to lower and when it reaches to the lower line it got rejected and move upwards.
If the trading range is a wide one then it is possible to trade the range with the swing trading approach. Such predictable patterns always bring good possibilities for the swing trader.
In the stocks swing trading is more successful among bullish traders. Bullish traders are those traders who only capture bullish trading opportunities and they never miss one. When they are using swing trading approach.
Such bullish swing trader particularly chooses stocks from a single sector and focus on few stocks to capture every move.
Bullish swing trader in the stock market prefers to take the trade when there is previous day high break. They never wait for the fancy setups to form they are in the market which runs for a few hours in a day.
They remain ready to catch every move especially the upward one.
If there is a stock which is moving higher from the previous few days then such trader takes previous day high break an opportunity. And the combination of zig-zag makes their strategy and best-performing one.
While in the forex and futures market swing traders take both sides of opportunities like shorts on the swing high and long on swing low.
They cover both trend trading and counter-trend trading. When they take a short trade from the swing high that is an opposing trend trade.
In the opposite scenario when traders commit a trade from the swing low in the bearish trend that will be considered a counter-trend trade.
Capture gains on the Upside and Downside
Swing and counter-trend trades may remain open for a longer time period. This trading style always brings a lot of pressure on it. Consider the first lowest point to exit from the long trade and highest point to exit from the short trade as well.
It works well in both situations. And to set the take profits the most previous swing high is the best point and same in short trades the most previous swing low is the best tp.
If you position met with your tp do not close immediately always prefer to close half of your trade and let the half run with no risk or profit lock.
It will enhance your winning. To stay risk-free always consider adjusting your stop loss in your favor as price moves forward.
When you are using swing trading approach you must consider 1:2 risk to reward ratio minimum.
Means your potential profits at-least twice you’re your stop loss or the number of pips which you are risking to make money.
Fading and Swing Trading
As I discuss earlier that swing traders always trade with the major trend in all asset classes. But there are traders who like to go with the counter-trend instead. Which is known as “fading” majority of trader use Fibonacci to figure it out and to find turning point.
In the currency market traders call it counter-trend trading but, in the stocks, it is known as “fading”. During the uptrend, the fading will provide selling opportunity and during the downtrend, it provides a buying opportunity.
Swing Trading Strategies
There are a lot of swing trading strategies which works well with the swing high and swing low and one can trade with those trading strategies. Basically, if the mindset of a trader become clear and he fully understands the trading edge of swing trading.
Then he can make money with any swing trading strategy because the entry and exit nearly remain the same with all of the trading strategy. Just a few pips difference did not make any difference in swing trading.
Why Swing Trading?
In my trading career, I prefer swing trading approach because it offers to collect small profits and within same trend multiple trading opportunities become possible. While on the other side cutting losses with this trading strategy is also easy to do the job. With swing trading, one can catch the trend early and can exit in small losses.
The risk to reward ratio is another benefit of swing trading. Majority of successful traders are following 1:2 risk to reward ratio. In most of my cases, I follow 1:4 risk to reward ratio. Which is not possible with any else approach. And consistency is the key to success which is very possible with this trading method.