Hi Traders, Swing trading is a type of trading which allows you to be in a trade longer than usual (usually several weeks). Different traders treat swing trading periods differently, but any trade that runs for several weeks or more falls in the category of swing trading, from my point of view. In this article, I’ll explain the advantages and myths of swing trading and why it is the best option for busy traders.
You can watch the video explanation of “Why Swing Trading Is THE BEST Option For BUSY Traders”
Advantages Of Swing Trading
The advantages of swing trading are as follows:
1. Doesn’t require much time in front of the charts- As a swing trader, you don’t need to spend much time in front of the charts. Sometimes, you don’t even need to check the charts daily.
2. You have enough time to analyze the opportunities and make a proper trading decision – Swing trading allows you to analyze the charts, prepare your trade and value your risk so you can make your trading decision properly.
3. You don’t need to “babysit” and monitor your trades and your charts – In swing trading, most of the time, it takes time until the price moves and reaches the levels you need. Thanks to that, you don’t need to sit in front of the charts waiting.
4. You can earn swaps (interest rate) by holding positions – Some instruments have positive swap commissions. By holding them, you can earn a swap and extra dollars.
5. Multiple instruments – Because you don’t need to monitor your trades all the time, you can trade multiple instruments at the same time and let them run until the price tells you to close them.
6. Great risk-reward ratio trades Thanks to the nature of swing trading, the moves and the trends are much bigger than on short-term trading, allowing you to ride bigger moves and earn bigger profits.
Myths About Swing Trading
1. There is a belief among traders that with Swing Trading, you will make fewer profits which is considered a disadvantage. Theoretically, it might be correct because, with day trading, you can have more trades. However, Swing Trading provides much longer opportunities with much better (usually) risk-reward ratio when compared to day trading. Also, as I said earlier, you can be involved with more instruments while Swing Trading compared to day trading.
2. There is another common belief that you can earn more with day trading, but it’s not the truth. Actually, with day trading, you might lose more because the reason is more you trade, the bigger the chances of making some trading mistake and forcing wrong trades and wrong setups.
Example of Swing Trading
To present and explain the idea of swing trading and its advantages, I would like to take one of the trades (EURAUD) which I shared recently with my Home Trader Club members.
This was my idea in EURAUD –
I saw a range breakout in situations of longer expectations for a trend continuation. The weekly chart provided the signs for possible bullish continuation. The daily chart had a bullish trending structure of higher highs and higher lows. Besides this, the downtrend line was broken, and the price created higher highs. After this, the price started to move inside a range. So for me, the plan was to buy pullbacks after this range was broken.
The price broke above the range as I expected it to, and then we had a retest. This retest also happens in a bullish trending structure (three waves to the upside followed by two corrective waves). The price also created a potential bullish divergence between the
two corrective waves. Also, the price has reached a key volume zone based on my volume profile Key Trading Levels Indicator.
I entered the trade after the breakout above the most recent downtrend line, and unless the market provides any opposite signs, I expect the price to move higher toward the target zone (around 1.61 – 1.62) shown in the image below. If the market provides me with any reversal signs and tells me to get out of the trade, then I listen to the market and get out of the trade.
From my point of view, the price structure is king because I believe the indicator’s job is to indicate, but the price’s job is to dictate. So if the conditions on the chart change, I get out of the trade. As I mentioned above, with this swing trade, one of the biggest advantages is a better risk-reward ratio when compared with day trading. This is because the more significant the waves you deal with, the bigger the chances of a better risk-reward ratio. This trade is a very good example of it; as you can see, we have an amazing risk-reward ratio of 1:3 to the first target zone and 1:5 to the final target zone.
Here is some interesting fact I want to share with you –
The most successful traders I know are swing traders and not scalpers because scalping is much more complicated, and not everyone can do that due to the different psychological barriers
I personally think that Swing Trading is an absolutely amazing trading style that can save you a lot of time. Of course, you won’t be dealing with profits and losses on a daily basis, this trading style is about the long run, but on the other hand, you don’t have to sit in front of the chart and spend hours of your time. Also, with this style of trading, you don’t have to force yourself into the trade because when you force yourself, then the chances for mistakes are higher, and you may end up on the losing side at the end of the day.
So, I hope you see the advantages of Swing Trading now.
Disclaimer: Please note that this is not any trading suggestion tip or recommendation. I just wanted to explain from my point of view about Swing Trading and give you an example of how I analyze and choose my risk-reward ratio.
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