Do you know about swing trading? If you have spent any amount of time investigating the different methods or styles of trading available then there is a good chance you have come across it. Swing trading is about a trader taking advantage of the swings in price or oscillations of price as it moves up and down over time. The basic idea behind this style of trading is that you profit as price undergoes its natural movements in the market. Swing trading is just one of the many different styles of trading but it is the best style regardless of the market you trade. There are several advantages that this trading style has over others and two of the most important are risk and reward. The three most popular trading styles are day trading, swing trading and buy and hold trading. The majority of trading systems fall into at least one of these trading styles. Swing trading is found in between day trading and buy and hold trading and is highly recommended, no matter what market you trade. Let s take a look at the other styles of trading.
The most popular yet most dangerous is day trading. Day traders typically keep their trades confined to a single trading day, hence the name. All trades must be opened and closed within a single day to be classified as day trading. The length of how long the trades are held can vary greatly. Some trades are held for just a few seconds, while others may be held for the majority of the day. Opening and closing trades for several seconds to minutes, commonly known as scalping, is also considered day trading. Scalping typically involves high risk but in turn offers potentially high profits. The promise of high returns is what draws many new traders to scalping, but they soon discover that the risk far outweighs the rewards offered by scalping. Buy and hold traders take the extreme of trading and commonly hold trades for several weeks to months. This style is typically used by very large corporations who wish to hedge or just have deep pockets and are in the market for extensive periods of time. Without large trading capital, you will find that the buy and hold trading style can be difficult to profit from and usually isn t used by small private traders.
Swing trading is medium term focused and usually has traders holding trades for several days, but less than a week. This trading style falls in between the above two extremes of very short and very long. Is it common for some traders to go longer? Of course, but this is just a general rule of thumb. While swing trading can be applied to any market, some are more suitable than others. Many traders swing trade because it is the only style to offer high rewards with the lowest levels of risk. This is the perfect balance for trading profitably.
Scalping, while sometimes profitable, usually results in many traders melting down and blowing up their trading capital. Only swing trading offers high rewards with low risk. This style of trading can be applied to forex, options, futures and many more markets.
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