Adopting a trading strategy depends on how one wants to invest and get profit. Two types of trading are famous among traders, day trading and swing trading. Both of these differ depending on the capital required and the liquidity of markets.
Both of the trading techniques need high concentration and perseverance of the trader. Down below, we are giving a brief description of day trading and swing trading.
Swing Trading Strategy: Better than Day Trading or Not?
It is one of the most popular forex trading strategies used majorly by technical traders. The technique helps make better decisions for investors, and the strategy indicators are of great importance. Moreover, swing trading indicators can help avoid losses and make the right amount too. Swing trading is suitable for those who do jobs and earn more profit besides their regular income. In swing trading, a trader can hold his position overnight and until several days.
Unlike day trading, swing trading does not require much knowledge to earn profit except technical indicators and charts.
In swing trading, the time frame allotted to the trader is more than day trading, and hence one can get more time to implement strategies and read charts to plan his trades.
Although market fluctuations may impart significant risks to individual trades, one can easily manage them because of the long period available to hold the position. Besides using price trends in commodities and other stocks, a swing trader has to do fundamental analysis. Past trends should also be analysed by technical analysis and indicators.
- One can chalk out strategies for trading.
- Trades are governed by technical analysis despite individual sentiments.
- One can change his position according to market sentiments.
- Can make a big profit on numerous trades.
- More liquidity is available as the time is more.
- One can invest in bonus share, right issues, and stocks split.
- One is not supposed to sit in front of a computer screen all the time.
- One can easily place stop-loss orders according to market sentiments.
- Overnight fluctuations in the market can convert the profit into losses.
- The risks involved are always high.
- This technique requires more patience to attain pre-decide goals.
It is the most common technique employed by traders in forex and stocks markets. In day trading, a trader uses high leverages and intraday trading strategies to profit from small investments and highly liquid markets.
In a day trading technique, a trader gets perks on small fluctuations in the markets. All the transactions are made on a single day. The trader has to close his/her position. In short, we can say that in day trading, the trader has only a single day to profit on his capital.
A trader makes a profit from both the upward and the downward swings of the market. It happens within a day by playing long and short.
- No worries about overnight market fluctuations.
- Less capital required.
- Useful for the voracious trader as the returns are quite suitable for small investments.
- No need for vast experience and knowledge about the markets.
- Good for beginners.
- A trader need not worry about any bad news and its repercussions on the market.
- Regular vigil is required.
- One cannot hold his position overnight.
- Whether having loss or profit, one has to close his position on the same day.
- As the profit is useful in day trading, likewise, the losses are also huge.
- Self-discipline and a clear objective are required.
- One cannot pre-plan his strategy.
- One cannot take the idea from past trends.
- One can’t make money by investing in bonus shares, right issues and stock splits
5 Notable Swing Trading Indicators
1. Moving Averages
MA or moving average is one of the most popular swing trading indicators in the market and is widely used by most traders. As the name suggests, the moving average is the aggregate of past prices, adjusted over a period. The tool aids the investors to get a true picture of the market and avoid price variation.
Further, the indicator is considered lagging. It is not a good source of determining entry points. However, it can help in establishing a trend.
Moreover, swing traders try to spot the moving average crossover points to forecast a reversal in momentum. Usually, traders spot a trend when the short term MA crosses a long time. Similarly, when the slow-moving MA crosses the fast-moving MA, it indicates a bearish trend and vice versa.
RSI or Relative Strength Index is another swing trading indicator that keeps varying between 0 and 100, with two significant levels of 30 and 70. The major levels indicate the market pressure, i.e. price line above 70, meaning overbought and below 30 means oversold.
The tool is of great help to traders in understanding and visualising the market. Usually, investors look for a divergence in RSI as it suggests a potential reversal and end of the current trend, especially when the market is on the same line for a long time.
3. Ease of Movement
EOM (or ease of movement) is a technical analyser that merges two other indicators, i.e. volume and price momentum. The indicator is useful in forecasting if the prices are falling or rising with ease. The ideology here is if the prices are moving in a certain direction with ease, then in the long term, it would continue to do so, even if the short term line is different.
The indicator is set against a baseline with the initial level at zero. A rise in asset price and a quick surge in EOM instead of volume indicate that sellers dominate and bullish forces are getting weaker.
4. Bollinger Bands
“Bollinger Bands” is one of the most widely used indicators, including three levels, i.e. a lower band, an upper band, and an SMA (simple moving average) line of the specified financial asset. The tool is considered the best way to measure volatility, and the upper and lower band indicates the positive and negative standard deviations.
When the gap between the two bands expands, it indicates high market volatility. And, a narrow gap indicates lower volatility. Similarly, if the price line touches the lower line, the market is oversold and vice versa.
5. Fibonacci Retracement
The Fibonacci retracement is a trading pattern which aids investors to identify resistance and support levels. It helps determine reversal levels on charts. Fibonacci retracements tool state that over a period stock price line move up or down in a certain pattern and ratio. The major Fibonacci ratios are 23.6%, 38.2%, and 61.8%, indicating trend reversal levels. One more popular point is 50%, despite not being fit in the retracement.
Top Swing Trading Broker
ROinvesting is a Cyprus based trading site that provides investment products and services at a low cost. The firm is a licensed brokerage firm under the financial body, CySEC, having license number 269/15. The trading site facilitates more than 350 trading assets, accessible through MT4 platforms via mobile, website, and desktop versions. Some of the top features include customer service, a wide range of payment portals, high leverage, and zero commission. You can open a demo service account with ROinvesting at no extra cost and start practising trades.
Note that the company is an official CFD partner for the renowned football club AC Milan. The organisation is a safe place to trade and offers good trading services.
The Bottom Line
So, these were the top 5 swing trading indicators. Note that these are not the only indicators but are considered one of the best out of all. But, despite following these indicators, many people fail due to mistakes they make. We can say that trading techniques like day trading and swing trading are suitable for individual perspectives. Those who want to make quick money are good to do day trading. And those who are not afraid of overnight or weekend fluctuation can do swing trading.
In both of the trading techniques, the main difference is the time. The day trader has less time to make his moves and earn a profit, whereas the swing trader has plenty of time to monitor his trades and implement profit-making strategies.