Saturday, 24 October 2009

What is Proper Swing Trading Money Management?

Managing your trading funds well is the key to winning at swing trading. If traders have poor money management, they more often than not begin to increase the size of their trades after they get a few winning trades under their belt. They do this with the hope of increasing their returns exponentially. However, this style of trading thanks to poor money management usually results in traders blowing up their trading accounts and losing more money than they make.

Effective money management should cover all of the following:

Detach yourself emotionally from the money.
Never trade more than you are comfortable with.
Never risk more than you stand to win.

First, you should place no importance or emotions on the money you use for trading. It is best to use money for swing trading that you know you can live without. This isn't about failure or the worry of failure. It is about being smart. Trading with your child's college funds will only add unwanted stress. Do you really need to make trading any more difficult by worrying about how you will feed your family if you lose next week's paycheck? Of course not.

Second, start trading with small amount. Don't rush yourself. The markets will be around for years to come and you should be in no rush. Just how small should you start trading? The answer to this depends on you, what do you feel comfortable with. When trading, you should be focused on trading and not on how much money you may win or lose. To avoid having this happen, don't trade with amounts that make you feel stressed or uncomfortable. You can even start trading using nothing more than a few cents. What is important is that you are comfortable and are in control of your trading.

Friday, 23 October 2009

What are the Best Swing Trading Indicators?

Having an indicator that was able to warn or show when markets were nearing turning points would make swing trading much easier. Knowing when markets were about to rally or retrace would make it easy to pick the perfect entry points for your trades. Luckily, such indicators already exist and make trading much easier. These indicators are known as momentum indicators.

The majority if indicators are known as lagging, but momentum indicators are leading and lead price. Basically, momentum indicators offer an insight into what price may do in the near future. Momentum indicators work on the basis of measuring a currency pair's level of momentum. As the speed of change in price begins to slow down, momentum indicators help you to indentify this loss of momentum and warn that there may be a rally or retracement in the near future. Momentum is essential to managing any trades you have by knowing in advance where price may go.

A very popular and widespread momentum indicator is RSI. The RSI (relative strength indicator) shows levels of a currency pair that are considered overbought or oversold. When the indicator is in these areas, a trader should be on the lookout for potential price retracement. When a market enters these areas of overbought or oversold, price typically adjusts to the new levels before it continues on. Being able to know that price may make adjustments in the near future, you can manage your trades before it is too late and essentially increase your trading edge.

If you are looking for someway to know in advance where price may go, check out what momentum indicators. The RSI is one of the oldest and most trusted trading indicators available. This may just be the trading indicator that you are looking for to give you an edge in your swing trading.