Swing trading: the use of basic parameters to make a profit
Swing trading is the application of price changes for profit. In this case a position is held open for a short period of time, usually from a few hours to 2-3 days. This technique allows you to get the maximum profit by closing the minimum number of transactions. Swing trading is not suitable for beginners, it requires experience and patience. In addition, it involves a high risk, and if you hold a position, you can incur losses. Funds can also be frozen, which will make it impossible to spend money on more attractive trades.
Experienced investors use this type of trading to hedge against fluctuations in the market. In addition, swing is convenient to use if there is no opportunity to trade all day, but you do not want to miss the chance to earn. This tool is part of the market cycle, and in order to benefit from it, you should learn to analyze when to use a strategy and when not.
Swing trading involves several compound factors, without which it is impossible to use it:
- wave analysis;
- support and resistance ranges;
- reversal graphical patterns;
- moving averages;
- multi time frame analysis.
In swing trading it is possible not to use waves, but to use moovings for market analysis, tracking of trend lines position on the chart.
Market activity can be described in the form of trend and correction movements that replace each other. The closing factor is considered important for swinging, as it is ideal for entry with a narrow stop and take profit. Volumes that increase in the trend and decrease in the correction will help to track the movements.
Manual closing for swinging is carried out in exceptional cases, such as when impulse movements are tracked immediately after entering the market. Another option is when a wrong forecast has been made and the position has not increased.
Support and resistance levels allow you to track the moments when the chart has encountered obstacles while moving. In this case you should pay attention to the price channels, which show how the chart will behave in the future.
It is important to consider two types of signals – rebound and breakout. The first one occurs when the chart moves to a level, and then makes a sharp turn. A breakout is observed when the trend resumes its dynamics.
In swing trading, deals are not closed as long as they make a profit. It is recommended to fix the profit by using take profit. Closing can be carried out manually or using stops, it is carried out when the trend reverses. It is important to make a correct entrance to the market when there is a growth.