Swing trading: take the advantage of mid-term positions

We continue our weekly series of educational articles about trading styles. Today’s style is swing trading — the mid-term strategy.

Swing trading is a method of trading using the moments of a pullback (correction) that occur during the formation of a trend. Its characteristic feature is the use of day/week timeframes and strict adherence to technical analysis.

We collected some general tips that can help you get started.

Define your goals

Before you begin swing trading, it is important to define your goals. What are you hoping to achieve? Are you looking to make a quick profit, or are you aiming for long-term gains? Swing trading is an intermediate option. In this style, the positions last 5-10 days on average, depending on the trend formation speed. If you want to get a fairly quick result but still aren’t willing to trace every small movement on the chart, swing trading is for you.

Choose a strategy

There are many different swing trading strategies, so you will need to develop one that suits your goals and risk appetite. Swing trading relies on technical analysis a lot. Since the process depends on identifying the market trend, your strategy should involve technical indicators to point out support/resistance levels and overbought/oversold conditions.  

Stay disciplined

It is important to stay disciplined and stick to your plan to avoid risks in swing trading. Control emotions that might influence your decisions. This style assumes that you hold your position during the whole process of trend development. Thus, if you see the chart going in an unfavorable direction for a short time, no need to close it too soon. Don’t let small pullbacks frighten you.

We recommend you pay attention to self-regulation — if you feel your emotions or risk passion are likely to take control over your consistence, read our article about trading discipline.

We previously made an overview of other trading styles. If you doubt whether swing trading suits you, take a look at others and choose the right one!

An example of a swing-trading strategy

One popular approach is to buy when the asset is oversold and sell when it is overbought. Technical analysis helps to identify these conditions.

For example, you might use the Relative Strength Index (RSI) or the Stochastic Oscillator. Both of these indicators are fairly easy to use and available on our new web terminal.

Once you have identified an oversold or overbought market, look for the entry and exit points using previous support and resistance levels. Make sure to place a stop-loss and a take-profit so that your position closes at the right time.

An example of a swing position

Here is a sell trade done by one of our users. As you can see, a GBPCHF deal took approximately four days, which is a common swing trade period. The trader successfully identified a mid-term bearish trend and earned $918.51. Using technical analysis, he also placed the take-profit at the 1.2015 level. After that level was achieved, the position closed automatically.

Swing trading can be a great way to make quick profits from the financial markets. However, it is important to have a good understanding of technical analysis and to stay disciplined. In case you are not yet familiar with technical analysis, use our trading ideas! Grand Capital’s financial experts share technical analysis reports daily, which are proven to result in profits.

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