June 21, 2019 | 02:25 AM


09.08.2018Swing trading: An introduction

This article will summarise the benefits that swing trading can bring while explaining how a new swing trader can get started.

Online trading can be a confusing and baffling world, and some of the terminology involved simply adds to the problem. The phrase “swing trading” perhaps doesn’t make much sense to someone who is new to trading, and that’s understandable. But that lack of knowledge shouldn’t lead to it being written off as a concept or as a trading strategy. Swing trading is in fact recommended as a strategy for beginners in the trading world to employ, as it’s simple enough to get to grips with but profitable enough to be sustainable. This article will summarise the benefits that swing trading can bring while explaining how a new swing trader can get started.

What is swing trading?

In some ways, swing trading works the same way as many other forms of speculation on the financial market. A trader purchases an instrument at a certain price with the aim of selling it later for a higher price than the one they paid for it. It is distinct from day trading – in which the trader hopes to make their profit within a handful of hours’ worth of market movements. With swing trading, it’s common to wait a few days or even a few weeks before making the sale and hopefully realising a profit.

That all sounds simple in theory, but in practice swing traders have to work out which instruments are looking likely to gain value in the short term – and that’s easier said than done. Usually, doing this relies primarily on observing “price action”. This requires some knowledge of the technical indicators which highlight potential price changes, and these can be learned by following online tutorials. Some potentially appropriate indicators for swing traders to look out for include on-balance volume (which can point to a stock which is undergoing particularly significant market sale level changes, and hence may also be about to change in price) and price rate of change (which can show how an instrument’s values have changed over time to form their most recent price). However, there are plenty of others to pick from – so a newbie swing trader can find ones that they are comfortable with.

Useful for beginners

The institutional investors of this world – which refers to investing organisations, such as banks – often avoid swing trading. That’s because they need to place enormous trades in order to make enough profit to satisfy every investor they work on behalf of, and it’s sometimes too unwieldy to place a trade and then close the position just a few days later. 

As a result, it tends to be retail investors or the one-person-band investment outfits who opt for swing trading. That happens to be the level at which beginners start. Swing trading requires research, but the conceptual basis is simple enough for new traders to follow. The principles of swing trading can also be applied to all sorts of different instruments, too, which gives beginners the versatility they need to find their feet.

In order to get started, it’s wise to first conduct some more research into exactly what swing trading is and how it works. Following that, the next step is to sign up with a broker and download a programme like MetaTrader, as this will allow traders to analyse charts using the technical indicators above.

As with all trading methods, swing trading isn’t a walk in the park. But it does have certain advantages which make it suitable for new traders: it’s compatible with a whole host of instruments, while the basic premises of the practice are easily followed. And by making the most of the many resources available online, traders can hone their swing trading skills and develop a top career.

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