Swing trading can be a great way to profit from the markets and is practiced by many successful traders. There are many systems, techniques, and strategies to consistently churn out profits trade after trade. But before one embarks upon this journey of successful swing trading, it is imperative to understand the nuances of the markets and the way it functions. With a little amount of patience and a thorough understanding of price movements, one can attain a commendable degree of expertise and success.
Price movements are cyclical and one needs to identify these cycles and trade the right one. It is a known fact that price has memory. If a price has behaved in a particular way at a particular level, the chances are that the same will be repeated. A trend will more often than not test a previous support or resistance level before taking off to a new one.
One needs to trade ahead of the crowd. A fair amount of time should be dedicated to analysis in order to stay ahead. Any good technical analysis software can assist one in doing so.
When looking at the charts one needs to find setups that are likely to turn around or breakout. Big moves commence from extreme price congestions. One should learn to identify price points that point to trade. Sometimes the best trades appear out of nowhere and keen and constant observation will assist one to identify these points and jump into a trade before the rest of the crowd. One has to act swiftly and grab the opportunity before it is too late.
Markets generally tend to trend 30% of the time and are range-bound for the remaining 70% of the time. A hawk eye observation during the range-bound period can help one to catch the price as soon as it starts trending. Various indicators, oscillators, and signals may be used for this purpose.
Another vital aspect of swing trading is stipulating the holding period of the trade. This primarily will depend upon the exit signals indicated upon the chart. News and external information may be used as a secondary tool. One must exit with the same swiftness as exhibited at the time of entry. Big losses rarely come without a warning and one must be alert and ready to jump out at the first sign of weakness. One must be able to visualize the signs of danger and execute a timely exit.
Swing trading, like any other form of trading, requires a special skill set and can be extremely rewarding. The markets have the fortune to offer for those who wish to work hard to earn it!