SWING TRADING strategy
Generally, the financial market traders used to various kind of trading methods which one method would be suitable to them that they will follow on so.. swing trading is one of the successful trading method. in this article we will see that, what is swing trading and how does it work?
The stock trading strategists define the swing trading, which trading style probably, trade against the stock market trend. first we need to understand about support and resistance. support refer, A stock price has already when touch on certain low price level then became rebound from down side. which is considered as support.
The resistance is same opposite to support level. A stock price when moving upward direction where price begin to fall from a certain level. which is considered as resistance level. typically, the technical chart shows many support and resistance level. in addition, few other technical indicators will create support and resistance such as, Moving averages, Fibonacci retracement, and weekly or monthly pivot point.
As was mentioned earlier, swing trading trading is that trade against overall market trend and individual stock trend. because, the benchmark index or individual stock is not move in straight line.. the prices very often face many ups and downs it is usually happen in stock market and all financial market. that's why swing will utilize of ups and downs and turns as a trading opportunity.
For example, A stock's chart pattern if made a double top or triple top (which is called chart pattern) the swing trader would find the trading opportunity who begin to make a short-selling on a resistance level. as well as a stock if trading nearby in a downward trend, here swing trader will enter at that place. who take along-position.
moving averages
The moving averages are acting like a support & resistance level. particularly long-term moving averages carefully watched by market participants. the long-term moving averages are 200 DMA and 100DMA and intermediate 50DMA play out a key role as support & resistance.
Fibonacci retracement
Duration of swing trading
swing traders hold their position from two days to two weeks. some who extend duration when stock move strongly in as a expected direction. usually, Day traders do not carry a position to overnight. so who will not take any risk of next day Gap-up and Gap-down risk . but swing traders have to take this risk to increase their profit level than day traders.
Advantage and Disadvantage
swing traders would meet a little loss because, he make short or long position very close to the support and resistance level. so who keep stop-loss at few point above or below . at the same time whose target level might be much higher when compare with loss. therefore, swing traders would accept small loss and got a higher profit.
The experienced swing traders who select weakening stocks when it come closer to the resistance level. as just like, who select a stock for long position when getting a strong momentum.
The significant disadvantage for swing trader is that, if the stock market is driving by huge liquidity thus, the stock market will not take much care about support and resistance level. in the sharp falling market, the swing traders will adversely affected by panic selling at that moment, the technical level would not work as a swing traders expectation.
How to select the stocks
in terms of the swing trading, it includes of many benefits and risk. the swing trader should follow a particular trading strategy at which one is suitable for them. the basic principle of stock selection is that, select a weak stocks for short-selling in a weaker market. like wise, select a stronger stocks in a strong bull market for long-position.
The same strategy should be applied even in swing trading but as a contrast, when market is in Bull-market - select the outperforming stocks near at the support level as well as select the weaken stocks to weaken sector for short-selling when hovering resistance level.
conclusion
swing trading is provided lot of trading opportunity. although, it's all depend on situation. the trader should analysis carefully when find trading opportunity. we have to find out market sentiment and which factors are driving the overall market at present situation. suppose, a trader could not find out market sentiment probably which leads to trading failure or struggling to make profit.
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