A swing is a popular form of short-term trading method which is widely popular for its given higher opportunity of making a profit. Beginners must know about this strategy just to have a viable option at their hand so that they can be more flexible in their approach to the market.
It is a method that focuses more on making smaller gains in short-term movements. This method also concentrates on cutting losses more quickly. However, no matter how little the profit volume may seem like, if one consistently conducts the process over a more extended time period, the net gain amount will take an excellent shape.
Depending on the nature and movement of the price, a swing position might be held from a few days to multiple weeks. A trader can elongate it further, though.
Basic of Swing Trading Method
We can start this part of the article by disclosing the optimal and safe earning rate for swing business strategy. Though the market commonly practices around 20%, or 25% profit rate, a percentage of about 5% to 10% is more modest. When you deal with the commodities at Saxo Bank, you will know how the modest profit gain can easily change your life. It might seem impossible but slowest approach at trading is the best method to earn.
This rate may not seem like so much at the initial stage. However, the time factor comes into the rescue.
A swing trader never focuses on the gain volume of a single trade. Instead, he tries to keep a consistency of winning in a more significant number of businesses. Hence, after finishing several exchanges, he can sum up an immense amount of gain. The key difference between a long-term trade and the swing trade is the number of order one can place in a given time. When the win is consistent, the more the trade number, the more the profit.
Though none should overlook the risk probability. Factoring in the losses volume will only increase the accuracy of the estimation. Because small profit will only be accumulated in a higher gain if only the loss amount is nominal. However, one can easily ensure it by setting his stop-loss point at a maximum of 2% or 3%. It will bring him to a place where he can benefit himself with a 3:1 loss-profit ratio.
Besides, swing trading during a strong upward movement can also yield a massive amount of fortune.
CAN SLIM SYSTEM
If you have ever heard of the CAN SLIM, you may know that it is an investment system related to comparatively long periods. However, this system is also viable and effective for swing-trading environment.
With this system, one takes profit only when the market is soaring or a consolidation period. He must be assured of a prior to a previous bullish trend. Sideways action to prevent giving up much room is preferred. The volume will confirm the accumulation of shares by institutions. The timeframe is the climax for the swing business.
Traders should look at the smaller ranging businesses rather than waiting for the consolidations that prevail over longer ranges like 5 or 7 weeks. The most part of the flexibility is offered by the lower profit expectation. When one is waiting for a 30% gain, it takes more time to find a suitable entry point as such cases mostly appear in longer timeframes. Conversely, if anyone is looking for opportunities with less profit expectation, he will relatively find quite many.
Similarly, one can consider analyzing the area of shorter consolidation. Because volume features of a breakout can take a shortened time range. When the breakout surpasses the ongoing activity, it signals a heavy strength in the movement.
Swing trading covers the middle ground between the day trading and position trading. Being the mediocre one, it shows duel attributes. So, it takes traders to be extra careful in dealing with the strategy.