A swing trader tries to make money by keeping an asset for a few days to several weeks. According to training manuals, the goal of a swing trader is to profit from a more significant price shift than would be possible in an intraday timeframe. However, because you operate over a broader range and move, you’ll need precise position sizing to minimise downside risk.
The term fundamental trading is used to describe swing trading. Fundamentalists are generally swing traders since changes in corporate fundamentals generally take days or even a week to move the market enough to generate a decent profit.
Day trading compared to swing trading
The primary distinction between the two types of trading strategies is the holding duration of a position. Day trading entails closing out positions before the conclusion of the market day, as the name implies. However, you risk overnight gaps developing up or down against your position when you swing trade.
As a result, whereas day trading generally entails utilising leverage to take bigger position sizes, swing trading typically necessitates taking smaller position sizes than intraday trading because day traders frequently use leverage to take larger position sizes.
Swing traders may profit from up to 50% overnight margin. However, as classes and guidance from seasoned traders will note, swing trading on margin is quite hazardous, especially if margin calls come.
The real benefit of swing or day trading is not in what you want to trade, whether commodities like oil futures or stocks from the CAC 40, a benchmark French stock market index. It’s more about when you do it. While day traders will be more interested in 4-hour and daily charts, the swing trader will be more focused on multi-day charts and candlestick patterns.
The use of stop-loss strategies on the final day differs considerably between swing trading, scalping, and day trading. Stop-losses are typically more prominent in a swing trade to match the proportional profit objective.
How to become a swing trader
The first step to becoming a professional FX swing trader is to develop a strong understanding of the markets you would like to trade. You need to know how the different currencies move in relation to each other and how economic indicators can impact currency prices. It’s also vital that you understand the concept of risk/reward to make informed decisions about when to enter and exit trades.
When you have a good understanding of the markets, you can identify potential swing trading opportunities. Look for currencies that are oversold or undervalued relative to other currencies. Also, keep an eye on economic indicators and political events that could impact currency prices. You need to act quickly and enter the trade at the right price when you see a potential opportunity.
Once you’re in a trade, you must manage your risk correctly. That means setting stop losses and taking profits when they’re available. It’s also essential to use proper money management techniques to avoid over-leveraging yourself and getting into a position where you can’t exit the trade if it goes against you.
Which stocks to swing trade
One of the first things you’ll learn from training manuals, podcasts, and user guides is that you need to select the appropriate securities. The stock market, for example, usually has the volume and volatility levels you require for large-cap stocks. A bear market rally is when a stock’s price drops. The downswing of the stock may last for weeks or even months. In contrast, the upswing is quicker and tends to go in one direction for more extended periods. Stocks frequently experience severe bottom-to-top declines (bear markets), referred to as ‘bloodies’.
The final say
Finding the best stock selections is a vital component of a swing approach. Selecting a platform with solid screeners and scanners may be beneficial as a hint to assist you in that task. There’s no point putting up a good plan if you’re investing in the wrong low-cost stocks.
Becoming a successful FX swing trader takes time, practice, and lots of hard work. Remember to stay disciplined, manage your risk correctly, and always look for potential opportunities.
We believe that you can achieve your trading objectives if you put your effort into it. We hope this essay has shed some light on what it takes to be an FX swing trader and given you some valuable suggestions.