Swing trading is a well-known CFD trading strategy wherein traders are able to pinpoint the buy and sell points when the indicator goes upward or downward. This price movement can happen overnight to a few weeks. Most of the time, swing traders utilize technical analysis in finding the best entry and exit points during a trading session. The main goal of this strategy is to find the right exit point, choose the most appropriate trend to ride, and maximize the profits that they have in every trade.
When it comes to holding time, a swing trader sits between an investor and a day trader. Day traders tend to hold a trading position for a few hours to a day while investors look for good opportunities to trade and they hold on to that position for years. A swing trader is in between these two because they hold the position for days or weeks.
Understanding the task of swing traders
Just like what its name suggests, swing traders look for price “swings” in the market. In every trade, there is a “swing low” and “swing high”. In between each of these swings, the traders will aim to have a position that matches the trend, retains it, and holds it for over a day. The trader will have an option to trade on stocks or currencies.
Some swing traders opt for a highly volatile stocks market because they see volatility as a chance to have a bigger range which leads to better exit and entry points. These types of instruments also produce lots of movements that you can expect.
Swing trading most likely takes advantage of trends and they are continuously researching for the support and resistance levels. Support levels are the price levels in which the asset “did not break through” for a period of time. Resistance levels, on the other hand, are the price levels in which the asset “did not drop” for a period of time.
Swing Trading Strategies
In swing trading, there are a couple of terms that you should get yourself familiar with.
Trading Strategy – is a systematic method on what, when, and how a trader should buy and sell in the financial market to make an adequate amount of profits.
Technical Analysis – is the method of assessing or evaluating the probabilities of price movements in the future. This method uses statistical data that focuses on the price graph of the asset that you have chosen to trade. Traders that are using this method speculate future price changes according to historical market data, indicators, and patterns.
Entry Point – this is the price point in which a trader finds it favorable to enter a trading position.
Exit Point – this is the price point at which a trader thinks that it is the perfect time to exit a trading position.
Swing trading is a simple CFD trading strategy that even new traders can easily practice. However, no matter how simple it is, always remember that your capital is at risk and you have to get into the basics before you start trading.