Ever wondered what is swing trading? Swing trading is just one of the many different styles of trading but it is the best style regardless of the market you trade. The main three styles of trading are day trading, swing trading and trend or buy and hold trading. Swing trading sits in the middle of these styles and I personally recommend this as the absolute best style of trading, regardless of the market. Let’s take a look at the other styles.
In day trading, traders usually open and hold trades for anywhere from a few seconds to less than a day. This style of trading also encompasses scalping, which is very popular amongst some traders. Scalping typically involves high risk but in turn offers potentially high profits. Trend traders, or buy and hold traders, usually involve trades being held for several weeks to months. The buy and hold strategy requires large amounts of capital to be effective.
Swing trading fits in between the above two styles and usually involves holding a trade for around 1 – 4 days, less than a week. Can you hold trades longer than this? Of course, but this is just a general rule of thumb. Some markets are more suitable for swing trading and it is important that you are trading the right currency pair or stock. Swing traders ride the swings or oscillations that markets make as the stock or currency pair pivots from one price level to another. Swing traders benefit from having low risk with high rewards. This is the perfect balance for trading profitably.
Scalping and buy and hold trading styles are either extremely high risk or the returns on your investment are too low. The most effective style of trading is swing trading. Swing trading offers low risk but the potential to make substantial profits in both forex and stock markets.