Swing trading is a longer term trading style that requires patience to hold your trades for several days at a time.
It is ideal for those who can’t monitor their charts throughout the day but can dedicate a couple of hours analyzing the market every night.
This is probably best suited for those who have full-time jobs or school but have enough free time to stay up-to-date with what is going on in the global economies.
Swing trading attempts to identify “swings” within a medium-term trend and enter only when there seems to be a high probability of winning.
For example, in an uptrend, you aim to buy (go long) at “swing lows.” And optionally, sell (go short) at “swing lows” to take advantage of temporary countertrends.
Because trades last much longer than one day, larger stop losses are required to weather volatility, and a forex trader must adapt that to their money management plan.
You will most likely see trades go against you during the holding time since there can be many fluctuations of the price during the shorter time frames.
It is important that you are able to remain calm during these times and trust in your analysis.
Since trades usually have larger targets, spreads won’t have as much of an impact on your overall profits.
As a result, trading pairs with larger spreads and lower liquidity is acceptable.
You might want to be a swing trader if:
- You don’t mind holding your trades for several days.
- You are willing to take fewer trades but more careful to make sure your trades are very good setups.
- You don’t mind having large stop losses.
- You are patient.
- You are able to remain calm when trades move against you.
You might NOT want to be a swing trader if:
- You like fast paced, action-packed trading.
- You are impatient and like to know whether you are right or wrong immediately.
- You get sweaty and anxious when trades go against you.
- You can’t spend a couple of hours every day to analyze the markets.
- You can’t give up your World of Warcraft raiding sessions.
If you have a full-time job but enjoy trading on the side, then swing trading might be more your style!