Swing trading is very popular in the trading world. It is known for its good risk and reward ratio. This kind of trading is usually adopted in speculative activity in the financial markets like binds, commodity, stock, stock index and foreign exchange.
What Is Swing Trading?
In swing trading, the trader is supposed to hold their trading position for more than one stock trading day. This may last up to 5 trading days. Swing trading generally aims for 100 pips profit probability. Profit potential is available from every market swing. Swing traders have quite the opportunities during the stock trading week when the market is more volatile. However, swing traders may have fewer opportunities as compared to a day trader. On the other hand, it doesn't require the trader to pay attention to the stock market all day long.
Tips for Better Swing Trading
Before you start swing trading, it is important to have some knowledge and understanding of the process. Afterwards, yo u can become a good swing trader by following some tips. However, let us first discuss the four stages of the market.
The first stage is known as the accumulation. In this stage, the trader are gathering up and taking their positions in anticipation of an opportunity. In the second stage, it is time for mark-up when the ones who got into move down during the first stage start making profits. There may be some late comers as well that are looking for an opportunity as well. The third stage is the distribution phase. During this stage, the positions are unwinding; traders get out before the next phase deteriorates their profits. The fourth stage is the markdown phase. The prices start to drop. In some of the markets, traders take positions during the third stage and then enjoy the ride down during this one.
The first tip is to focus on the trading breakouts to the upside and pullbacks as well during the second stage.
The second tip is about stage four. Start focusing on breakouts to the downside and sell rallies in price.
Additional Swing Trading Tips Limit your risk per trade between 0.5 to 2% for your overall account size. Remember to keep your account size and experience under consideration as well. Make sure that your overall market exposure is not more than approximately 6% of your overall capitalization. You can protect yourself against negative market action by placing a protective stop in the market at the time of the execution of the trade. Never try to derail our focus from proper trading. You may end up broke if you continuously take profits that are always smaller than the trades you lost. Lastly, never forget that there is a difference between an actual trader and a person who knows about swing trades.
You can become good at swing trading if you follow these tips but it should always be remembered that it tales experience. The condition of the market always plays an important role. For better results swing trading analysis should always incluse volume analysis.
We will try our best to keep this blog full of knowledge nugets supported by our research from swingalpha.com