What is Swing Trading

Swing trading is just one of the many different styles of trading but it makes trading the best business in the world.  The three main styles of trading are:

• Day trading
• Swing trading
• Buy and hold trading

Swing trading sits in the middle of these styles and I personally recommend this as the absolute best style of trading, regardless of the market.

In day trading, traders usually open and hold trades for anywhere from a few seconds to less than a day.  This style of trading also encompasses scalping, which is very popular amongst some traders.  Buy and hold trading usually involves trades being held for several weeks to months.

Swing trading usually involves holding a trade for around 1 – 4 days, typically less than a week.  Can you hold trades longer than this?  Of course, but this is just a general rule of thumb.  Some markets are more suitable for swing trading and it is important that you are trading the right currency pair if swing trading forex markets.  Swing traders ride the swings or oscillations that markets make as the stock or currency pair pivots from one price level to another.

OK, that sounds great but what or how does a swing trader trade?  Swing trading typically involves a trader buying in the direction of the major trend.  Generally speaking, they do not trade against the overall trend.  Their trades are held for several days and as such they usually watch the higher time frame charts (1 hour and higher) when monitoring and placing trades.

There are many different ways a swing trader could place a trade in the direction of the major trend.  The most common practice is to wait for price to retrace before and enter a trade before it continues onwards.  Entry is usually based on price bouncing off of support or resistance levels, trend lines or in some cases indicator confirmation.

Swing traders are looking to enter on pullbacks as price retraces and then continues in the direction of the major trend.  By observing the higher timeframe charts and only entering trades in the direction of the major trend, swing traders have the odds stacked in their favour making this the best style of trading regardless of your market.