*Advantages of Swing Trading* ━━━━━━━━━━━━━ It allows you | Stock Market News
*Advantages of Swing Trading*
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It allows you to take advantage of the natural ebb and flow of markets. Financial markets never go in one direction forever, and by being able to take advantage of that, you can increase your returns as you in theory are going to be making money when the market rises over the next few days, and then make some when the market pulls back, as it will certainly do sooner or later.
By being in and out of the markets, you can identify more opportunities. If you look at any financial chart, you can see that there is almost always a definite long-term trend, but the market might not always be at a support or resistance area. By being in and out of the market in a matter of a few days, (typically) you can collect profits, and identify other markets that are setting up for other trades. This allows you to spread the risk around, and ties up a lot less capital instead of constantly having to come up with margin for new positions as you find new trades. By closing your first position, you will not have to deposit more money in your account to cover the second one.
Stop losses are typically smaller than longer term trades. The stop losses on a swing trade might be 100 pips based upon a 4 hour chart, while a stop loss on a weekly chart that is based upon the overall trend might have to be 400 pips. This allows for you to place larger sized positions instead of extremely low leveraged ones via the longer-term trends.
You have clear boundaries. The swing trader is a more technical based trader, and as such will normally have a specific area that they deem as being a sign the trade is working against them. Because of this, you know exactly when the trade isn’t working and can limit the damage a bad trade can do. Longer-term traders normally have to give a wide berth for the markets as they wait for them to “go with the fundamentals”.
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