Wednesday, 30 September 2009

Which Markets Are Best For Swing Trading

Swing trading offers a trader the chance to reap massive returns but without the usual high levels of risk you may find in other styles of trading. Swing trading is not limited to any specific market and can be used on any market around the world. However, a market must posses to main key factors in order for you to be able to enjoy the benefits of swing trading.

First, swing trading requires a market that is known to trend more than going sideways. Some markets are seemingly randomless and offer no explanation as to why they move like they do. Swing traders prefer markets that trend more often than not. This must be present to allow you to take chunks or slices out of the market and make money.

Secondly, volatile markets are not suitable for swing trading. If your market is too volatile, it will be difficult to open and close trades in time before price moves against you. Swing trading takes time and as a result if a stock moves too fast or too abruptly in any one direction, it does not give you time to plan your entry and exit. The best kind of market to trade is one that is traded heavily.

To make the most of swing trading you must first find a market that has a high tendency to trend and is not too volatile. Always remember this and you will increase your swing trading edge.

Why Swing Trading Matters?

As a trader, you have available at your dispose many styles of trading, regardless if you prefer stocks over FOREX or options over futures. Trading by its very nature is risky, it would be advised to take some time and find out which style of trading offers the best and safest return on your investment. Use swing trading to gain a true advantage over the market and other players.

Two simple but powerful reasons make it clear why swing trading is second to none. The first being that you do not need to be glued to your monitor 24 hours a day watching and waiting for a suitable trade setup. How many new traders do you know that think they must sit in front of a monitor all day waiting for a trade? Probably quite a lot. Typically, this kind of trading doesn't help at all and instead ends up with blown up trading accounts. You don't need to spend hours each day watching charts waiting to pin point your entry. Swing trading allows you to spend as much or as little time in front of the screen as you want. Entering and exiting trades doesn't mean you must be near your computer all day.

The second reason swing trading is the most suitable form of trading is that it offers you the lowest level of risk. Swing traders see the big picture. They usually observe markets from the higher timeframes and can see major trends much more clearly. Trading low level timeframes is difficult as the trends come and go much faster. The trends they see may only last minutes or hours. Swing traders can identify and trade in the direction of major trends which can last days, weeks, months or even years. By being able to trade in the direction of these major trends, returns on your investment are increased greatly while the chance of a loss is reduced significantly.

Everyone is different and as a result the style of trading you prefer might be different to someone elses, but if you are looking for high reward with low risk then nothing comes close to swing trading. Swing traders usually follow the smart money thanks to their preference of trading higher timeframes and only trading in the direction of the trend.

Just What Is Swing Trading?

Do you know about swing trading? Swing traders ride the swings or oscillations that markets make as the stock or currency pair pivots from one price level to another. Swing trading is a style of trading that can be used on any market. The main three styles of trading are day trading, swing trading and trend or buy and hold trading. Swing trading is found in between day trading and buy and hold trading and is highly recommended, no matter what you trade. Let's take a look at the other styles.

Day traders typically keep their trades confined to a single trading day, hence the name. Scalping is also considered a day trading style of trading. While sclaping can offer extremely high rates of return, it does so with very high risk levels. Trend traders, or buy and hold traders, usually involve trades being held for several weeks to months. A trader typically needs substantial trading capital to be able to make any decent profit from buy and hold trading.

Swing trading is medium term focused and usually has traders holding trades for several days, but less than a week. Do traders hold trades for longer periods? Of course, but this is just a general rule of thumb. Some markets are more suitable for swing trading and it is important that you are trading the right currency pair or stock. High rates of return with low risk is what make many traders swing trade. This is the perfect balance for trading profitably.

Buy and hold trading typically involves high levels of capital that far exceed the profit potential. Only swing trading offers high rewards with low risk. Swing trading offers low risk but the potential to make substantial profits in both forex and stock markets.