Swing trading is a fundamental type of short-term market speculation where positions are held for more than one day. OctagonTrade Presents what is Swing Trading.
The definition of swing trading for beginners is that users seek to capture gains by holding an instrument overnight to several weeks. As the training guides point out, the goal is to capitalize on a larger price change than is possible within an intraday time frame. But since you are following a wider price range and lag, you need calculated position sizing to reduce downside risk.
To do this, individuals use technical analysis to identify instruments with short-term price dynamics. This means following the fundamentals and principles of the price action and trends.
Swing trading setups and methods are generally undertaken by individuals rather than large institutions. Indeed, large companies generally negotiate too large sizes to enter and exit securities quickly. However, as the examples will show, individual traders can capitalize on short term price fluctuations.
Swing trading has several advantages:
- Application: The swing trade can be effective on a long list of markets and instruments. For example, you can speculate on the latest alternative currencies, such as bitcoin (BTC), ethereum (ETH), and litecoin (LTC). Alternatively, you can stick to the swing trade with standard options.
- Tools: You can trade with candles and other techniques on any number of platforms, from Robinhood to MetaTrader. There is also the option of using automated bots and expert advisor (EA) software. If used correctly, they can allow you to perform a lot more swing operation than you could do manually.
Risks of Swing trading:
Swing trading has some drawbacks, including:
- Market risk: you can definitely lose money. While some have made it easy, any mistake will end up where it hurts the most, your income. And sadly, as is the nature of speculation in the markets, lessons are often learned the hard way. Also, trading at a margin and using leverage could cost you more than your initial investment.
- Time: Swing trading is not one of the types of trading where you can enter your position and just check it a week later. It’s live trading and the strategies that work require constant monitoring. This means that juggling the swing trade with a full-time job can be a challenge.
- Taxes: Swing trading does not primarily protect you from taxes. In fact, in the United States, for example, you can get caught up in the laws of merchant customers. Therefore, first check that you can meet all the obligations of your financial system.
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