Swing trading can be a very profitable form of trading. It can also be very painful. Traders new to swing trading can often find themselves making bad choices all too quickly. Learning how to spot a good trade and learn to ride it out can mean the difference between profit and loss. Here are a couple of swing trading strategies that will help you make more money while enjoying less of the losses.
Most swing trading strategies involve you entering a trade with a stop-loss on your positions. When an asset begins to fall, you exit your open trades and close your position. The theory behind this strategy is to tolerate as much pain as you can until the market reverses and you book your profits. The problem with this strategy is that it often results in traders exiting their positions before they reach their target price.
One way to minimize your losses while still taking advantage of strong moves is to learn to read the different swing trading indicators. Indicators are often used to show you where a stock is going so you can enter trades based on their direction. However, not all indicators work the same. As a result, you need to learn a variety of swing trading strategies to take advantage of these different trading styles.
Some traders favor moving averages and other moving average based swing trade strategies. With these moving averages, you will use multiple moving averages, typically three, and set them to focus on one particular time frame. You’ll track how the stocks in your chosen timeframe perform and then look for a similarity to your chosen pattern. If there is a similarity, you may take advantage of the trading opportunities. However, if the stocks don’t perform similarly, you’ll have to rethink your strategy.
Other swing trading strategies rely on breakouts. These include technical analysis, continuation trading and even momentum. Technical analysis is based on looking for support or resistance levels in a particular stock and then using technical indicators to show where the stock is likely to head in terms of direction. Moving averages can be used in the same way. They show where the stock is moving with a period of time, but you must keep in mind that a breakout can also involve shorting or investing too early.
Another type of trading strategies focuses on the trend trader. The trend trader takes advantage of the ability to create trends. You make an entry based on a trend, then wait for the trend to continue. If the trend continues, you exit your position. If, on the contrary, the trend stops, you simply stay put and wait for the value to go down in order to open a profit.
Swing trading strategies that use MACD software are very popular. MACD stands for Moving Average Convergence Divergence. MACD is a charting technique that makes use of moving averages, which are typically lagging indicators. Traders can use these moving averages together with other tools to determine whether the best time to enter a trade is as close to the middle of the range as possible, or as far away as possible. When there are trading opportunities to take advantage of at the outer edges of the range, it is often best to get out before the price goes too far away.
It is important to note that all these strategies have pros and cons. As a trader, you need to evaluate each one to decide which one is best suited to your style of trading. And swing trading involves some risk. Determine which of the swing trading strategies you feel comfortable with and use it to find good trading opportunities.