Swing trading is a speculative trading strategy obtainable in the financial market.
It is where an asset is held for one or more days with the aim of earning profit from an increased ‘swing’ in the price of such commodity.
Swing trading strategies usually involve trying to make short to medium term profits in any financial instrument.
The duration of a swing trade ranges from a few days to a few weeks.
Swing trading involves the use of technical analysis to determine whether or not a particular commodity or stock might go up or down in the very near term by examining technical indicators.
You can swing trade assets such as Forex, Stocks, Exchange Traded Funds (ETFs), Contracts For Differences (CFDs), and cryptocurrencies.
Benefits Of Swing Trading
Flexible Portfolio Management
Short term trading generally needs constant monitoring.
It is more flexible when it comes to swing trade as you do not have to monitor your tradings every day.
You can monitor your positions at intervals and take actions where necessary. This gives you time for other things.
Swing trade is a short term trading position as you get the results within weeks, unlike long term trading, where you have to wait for months.
Swing trading allows you to trade more assets over a period of time, unlike day trading, which limits your trading because of time constraints.
Who Is A Swing Trader?
A swing trader buys and sells financial instruments that technical indicators suggest an upward or downward trend in the near future.
In contrast to a day trader, who is usually in and out of the market in one day, a swing trader often holds a position for more than a day.
Being a swing trader requires less time to trade than day trading.
A swing trader maximizes short term profit potential by capturing the bulk of market swings.
Swing trading strategies are subject to overnight and weekend market risks.
The common swing trading strategies commonly used include Fibonacci Retracement, T-line Trading, and Japanese Candlesticks.
Swing Trading Tips For Beginners
As a beginner, you must remember that swing trading is about capturing gains by holding a trading position for more than a day.
The objective is to capitalize on a significant price shift over a period of time.
Some swing traders prefer to trade after the market has confirmed a change of direction.
They will then leverage their trading on the momentum.
Others may choose to enter the market on the long side after the market has dropped to the lower band of its price channel, buying short-term weakness and selling short-term strength.
Both approaches can be profitable if implemented with skill and discipline over time.
Here are some tips that can guide a beginner in swing trading.
Have A Strategy And Stick To It
There will be highs and lows during trading.
That is the very nature of buying and selling in the financial market.
However, let research and analysis dictate the ups and downs, do not let your emotions get in the way.
Deciding when to sell can quickly become an emotional decision when you have your returns on the line.
So, formulate a strategy and stick to it religiously.
Employ A Good Risk Management Strategy
Risk appetite varies between traders.
When you want to go into swing trading, find risk parameters that suit you.
For example, you may want to start by not risking more than 5% of your capital on a particular asset.
With time, you will know the level of your risk appetite. But it is better to know this as early as possible.
The financial market is constantly reacting to happenings around the world. It is advisable to keep abreast of the latest news updates that will directly affect market prices.
Many resources, such as Yahoo Finance and CNBC, will provide market analysis and commentary, using volume, price, and weekly charts.
Therefore, the news can help you highlight potential options and dividend stocks to keep an eye on. It could also help you plan your entries and exits.
Keep Seeking Knowledge
There is a wealth of information available to help you develop effective swing trading strategies.
Video tutorials, financial blogs, and magazines can teach you techniques to improve your swing trading abilities.
Keep a journal to note prices, dates, positions, and reasons for entry and exit points.
This could help you see why your breakouts plan for currency pairs does not work on weekly charts.
How To Become A Swing Trader On eToro
eToro trading platform is easily one of the most reputable trading platforms you can find around.
The transparency level on the eToro trading platform makes it a preferred choice for most traders.
They offer a wide range of trading options like cryptocurrency, forex, stocks, ETFs, indices, and commodities in the financial market.
Unlike traditional brokers, all trades made on the platform are shared to benefit the entire community.
So not only can people trade as they do with the conventional brokers, but inexperienced traders can copy the trades of successful traders on the eToro platform.
To start swing trading on eToro, you must first open an eToro trading account.
There are a few steps to follow to create an eToro trading account.
The first step is to log on to eToro’s website and click the “Trade now” button which will direct you to a page where you’ll fill an electronic form with all your personal information as required.
Ensure you go over the information you supplied before submitting the form by clicking the ‘sign-up’ button.
Their KYC policy will require you to verify your account by providing necessary and accurate information on your identity and address.
The next step is to credit your eToro trading account.
To do this, open your newly created eToro account and click “Deposit Funds”.
You will then be required to select the amount you want to deposit in the trading account. You will then proceed to select a preferred payment method.
After creating a trading account on eToro, proceed to search for the asset you want to swing trade using the search box at the top of your account dashboard.
After picking the asset, you’ll decide on the amount you want to use in trading and whether you want to leverage your trade.
You can set up a stop loss using the tab on the left-hand section of your trading window.
The eToro trading platform has a feature called “Trailing Stop Loss” that ensures your stop loss moves up when the price of the asset traded increases.
Setting up a stop loss also allows you to lock in your profits.
If you’re a new swing trader and you want to learn how to swing trade, the copy trading feature on eToro trading platform allows you to copytrade experienced swing traders while you learn the ropes.