If you start trading, you will learn about several strategies promising to meet your goals. But one strategy Beginner traders should embark on is a swing trade. There are several reasons to trust this approach; the following section will unpack its intricacies. It’s best to start with the basics.
Swing trading is an art perfected by the most successful swing traders in which you make fast moves (buying or selling a stock) within a short time frame ranging from days to weeks or even several months. Ideally, you enter a trade when the market is poised for upward or downward trends, and the odds of success are overwhelmingly in your favor.
The catch here is that you must implement appropriate risk management strategies. For example, you can place large stop losses to hedge against the risk of sudden market U-turns.
During swing trade, you must exercise much patience and trust in your strategy as trades might go against you in shorter periods. However, since swing trades usually have larger nets, the spreads won’t greatly impact your profits.
Swing trading is very advantageous in terms of capital use and the high returns it brings. It is ideal for those traders who don’t have the luxury of time to monitor the charts for the whole day but can only spare a few hours each day. The core tools you can use in swing trading are technical and fundamental analyses that detect a particular exchange’s trajectory shortly.
Related Read: Swing Trading VS Day Trading
Swing trading strategies are best suited for investors looking to capitalize on strong moves that bring about the quickest gain of all high-frame strategies. Of course, there are endless strategies that you can employ in your swing trade, like following price action patterns but these three are the ones considered more traditional.
A breakout is when the price of a stock moves outside of a certain limit which might be (support or resistance). Therefore, you perform breakout trading when the momentum is clearly in your favor. The downside of this kind of trading is that the momentum could be false, forcing you to buy high only for the trend to do a major reversal.
Learning the intricacies of complex securities can give you handsome returns. In addition, dealing with derivatives can enable you to place contracts on a lot of things. For instance, you can buy contracts against the price of gold and livestock; the list is endless.
If you want to get such profits beyond the usual stock market, you can use derivative options to access such trades. In other words, an option is a contract that awards you the right to buy or sell a certain amount of underlying assets at a particular premium or price.
The only catch to this is that you, the bearer of the option, must exercise your right within a stipulated date, after which the option ceases to exist.
A breakdown is the opposite of a breakout. Here, you can take a position when determining the beginning of a downward-moving market. It occurs mostly during peak trading volume when the price hits a certain support level, resulting in dramatic price movements downwards.
Related Read: Day Trading Side Hustle – Doing It Successfully
Swing trading is one of the best styles for amateur traders to get their feet as they navigate the world of trade. Not only is it less demanding than day trading, but it can also assist you in gaining meaningful market returns relatively easily if you plan and prepare well.