To analyse the market, investors use several indicators or strategies that would aid them to benefit from the trade. The trading tools are dependent on the market factors which impact it technically and fundamentally. The financial market investments have been scary for beginners and experts as they are highly volatile. To manage the uncertainties, investors use trading tools.
Swing trading is a speculative trading technique that is used for short-term marketing investments. The traders invest in markets for a period of some hours, a day, and a few weeks. These are studied on the charts and patterns offered by online brokers like PrimeFin. Traders can register with the brokers and, through their trading accounts, access the trading platforms.
By the end of the article, traders will be able to understand swing trade, how it works, and how it is profitable for the market investors. So, let’s quickly drive in to know the trade better.
What is Swing Trade?
A market trading strategy that could be studied through charts for analysing the movements of the price of the assets traded. Swing trade is the short-term trading indicator preferred by most market investors. It is different from day trading and short-term scalping strategies. Moreover, it gives traders time to invest and earn profits.
The swings formed from the trade help the traders analyse market patterns and know the entry and exit points. It is a technical indicator of the market that studies the prices of the asset in the short term. Investors, through the strategy, can enter into buying of the assets or go for short selling options.
Swing trade uses the mathematical rules for its objective trading; traders with this can buy and sell the assets and eliminate the subjectivity of the trade, emotionless and other analysis factors such as labor-intensive. The rules aid traders in creating algorithms or a trading system that could be used for technical and fundamental analysis.
The analysis gives the investors trading signals and an understanding of the market price fluctuations. The strategy gives traders small market profits, which all together come up as huge profit if the market works in favour of the trader. However, the entry and exit are not that clear for a swing trader.
A swing trader could earn high returns only if they follow the rules strictly with risk and money management techniques. The risks of swing trading are increasing with a trading range and when the price moves sideways. Although, traders can earn profits in bear and bull markets.
Swing Trading vs Day Trading
Swing trade is explained above, but how does it differ from day trading strategy? Many investors and traders get confused about the two strategies of the financial market. Swing trading and day trading both are short-term trading strategies, but the main element that makes them unlike is their time of the trade.
In day trading, investors trade for a day; it could be a whole day trade or multiple market positions in a day. Whereas the swing trade allows investors for days or weeks of trade. Thus, more scope and market opportunities. Their time frames used for trade are also different due to trade timings.
As the day traders have a single day to invest and earn, they do not hold a market position overnight. Whereas swing traders have the option to trade overnight. However, it becomes risky for the swing traders as the uncertain market change or any announcement could impact the price of the asset. But, the situation proves to be beneficial for day traders.
Another point of difference in these two trading styles is that day traders have shorter time frames than swing traders, which welcomes added risk as the spreads are high, that is, the gap of the bid and the ask price of the asset. On the other hand, the commission charges are also significantly high.
Day traders have the profit of using leverage for their trade with four times their investment. Thus, having more opportunities to invest and earn. However, for earning from this, traders need to be careful, disciplined, and focused. Swing traders do not have high leverage options and can therefore have less risk of trading.
Swing traders can trade for days or weeks and do not have to do many transactions. It could have transactions on some days, and on other days they may relax. But, in day trading, traders have to trade on a daily basis. It is more like a daily job for them without any other option.
Traders keep looking for constant opportunities and diversify their portfolios with day trading. It becomes quite hectic for the traders of day trading strategy. Learn more differences between Swing Trading vs Day Trading
How to Swing Trade?
Swing trading is a process that could be used in various markets. Here we have discussed the steps of swing trade to make investors and readers understand how it works to advantage them. The traders have to keep certain points in mind that are essential for swing trade.
The first point is the strategy could be used through the trading platforms offered by online brokers. As the brokers have tools for analysis, research, and study, making it a smooth process for the traders. So, brokers like PrimeFin could be used for this purpose.
In addition, the broker has a demo account which helps practice the trade, experiment with the strategies to have successful and profitable trading.
Another point to remember is that swing trading is an indicator and technical strategy which analyses the price movement of the assets. Now, let’s understand the steps of using swing trade:
The trading account is the most primary thing traders require for investment and using tools. For this, traders first register with the broker with details such as name, email address, contact number, and password. The registered trader can then further enter the details that brokers need for creating an account.
They fill in the information, questionnaires related to previous trade experience, upload documents for verification and choose the trading account that suits their market requirements. Then, at last, traders deposit the minimum trade amount for starting the trade.
With PrimeFin, traders can enjoy the facility of three trading accounts; silver, gold, and platinum. All the accounts are as per client needs and will be the best for trading.
Research market using tools
The second step for swing trading is analysing the market to ensure traders invest in the correct market and at the right time. For the purpose of research of the market, traders use tools that help them analyse the asset and its market factors. The research gives traders a deep idea about the market and changes taking place in the future.
The trading tools could be used as indicators or signals of market investment. These aware the traders for change in the market with their advanced softwares and tools. Traders can use both technical and fundamental tools of analysis to cover the market. The technical analysis relates to price; in contrast, the fundamental analysis relates to economic changes.
Moreover, there are pattern recognition scanners that help know the market reversals. Inform traders about the other changes taking place in the price signals that give traders a chart view of the price changes with the swing trading tool. Swing trade forms the price swings that give an idea of the price fluctuations and how traders can benefit from them.
Assets to Trade
Once a trader has a trading account, knows the trading tools, has done the research of the market, next, they select the trading asset to invest. They choose the asset they will invest in and then use the swing trade on. The trading tools timely give signals to the investors about the swings formed and when traders can enter and exit the trade.
Traders can set their time frames as per their research and then make a profit out of their trade. Traders use the support and resistance to decide their investment and when they can buy and sell.
Risk Management and Trading Strategies
Investors have made the investment with the selection of the asset using swing trading. Next, they set their risk management strategies and use other trading strategies that would combine to enhance the trade and make profits for traders. For example, traders can set stop-loss and take-profit orders to minimize the risks and increase profits.
With risk management and trading strategies, traders can keep their investments consistent and relevant.
Monitor and Regular Trade
The swing trading strategy is applied with other strategies for earning profits from the asset. But just investing won’t do that. Traders have to monitor their investment regularly from time to time with the help of devices and applications that are offered by the brokers.
There are a number of ways that could aid traders connecting directly with market movements in real time through the broker’s advanced softwares and tools. PrimeFin, for example, has its own application for mobile use and works with all the devices. In addition, its trading platform, MetaTrader4, is user-friendly and could be used with different devices.
With this, traders could be aware of the gapping, slippage, changes in the market sentiments, and other factors.
The traders can exit the market with their stop-loss order, but if that does not work, traders can manually close their trade. However, traders should watch over their investments and should not completely rely on the tools and platforms of the technology.
Being technical machines, these could break down sometimes; therefore, a regular checkup would be highly recommended.
Advantages of Swing Trading
Swing trade is a profitable and frequently used short-term investment strategy. Traders use the swing trades to analyse the price changes and accordingly trade. Below mentioned are the advantages of swing trading strategy that will give a quick glimpse of the strategy used and why it is important.
Swing trading strategy has a big profit and loss potential in the market. Traders can enter and exit the trade with market study, know their market, invest in the profitable assets, or exit when they feel the loss. Swings formed on the charts are of significance as they tell the potential profits and loss from the assets.
Traders can concentrate on important things of the market and minimise their losses.
The market is all about the price of the traded asset, and if a trader is not able to earn, then the losses are high. Therefore, the price of the asset is the first priority of traders. With swing trading, investors study the price of the asset and when they will increase or decrease.
However, these are predictions based on certain things of the market. Traders use it for profit earning. Therefore, swing trading is a technical indicator of the market. Investors make informed decisions and reduce the speculation risks.
Swing trade has many strategies that could be used with it for making correct predictions. They can use the Bollinger Band, Fibonacci Retracement, Oscillators or moving averages, etc., to identify the price’s market changes. Moreover, the swing trade forms patterns that could be studied and known by traders for accurate trade decisions.
Head and shoulders patterns, flag creation, triangle patterns, a crossover of moving average, cup and handle pattern, etc. These all should be studied and known by the users of swing trade strategy.
The financial market trading has been fascinating, but the risks of the market make traders give it a second thought. But with the advancement of technology and trading techniques, there are some significant analysis tools that help predict market changes. Traders can know the technical and fundamental factors with trading platforms.
Trading platforms, as we know, are available with brokers like PrimeFin that aid the traders in trading. The article has deep talked about swing trade and its elements to make it understandable and easy to use. However, traders should be focused and disciplined with their research and trade to never miss an opportunity.