The Basics of Becoming a Swing Trader

8月23日

In this educational lesson, we will explain the concept of swing trading so that aspiring traders can learn how it works and what it means. Swing trading is considered a short to medium-term strategy that aims to trade specific market “swings” or oscillations within a broader trend. Swing trading is not day trading, and it is not long-term investing. Instead, it fits somewhere between those two disciplines.

Swing trading typically spans a few days to several weeks and it begins with the trader spotting a large trend, finding a discrepancy in the current price within that larger trend, and then structuring a trade based on this intermediate price action. Swing traders primarily rely on technical analysis, using indicators and strategies to spot these specific swings within larger trends.

Before we discuss the details of these indicators and other concepts, allow us to give you the basics one more time. Here are the key points:

Timeframe: Medium term

Analysis: Mostly technical

Goal: Capitalize on moves within larger trends

Example: Open a chart of USD/JPY (USDJPY) and look at the trend since early 2021. Now, within that trend, look for the oscillations and swings that occurred, showing quick drops and then quick rises or vice versa. Swing traders look to spot these price movements within the overall trend, placing trades that last a few days to several weeks.

Forex Swing Trading:

Forex markets are ideal for swing trading due to high liquidity, typically tight spreads, and around the clock trading. Traders usually focus on momentum peaks and dips, rather than long-term currency value. Both concepts are unique to forex markets and make it ripe for swing trading. In addition, like all other markets, technical tools can be accessed in forex markets as well.

If you’re interested in learning how specific indicators are used by swing traders, go give the following indicators a look:

1. A short to medium-term moving average like 5, 10 or 20 days.

2. MACD to research crossovers and divergence between price and moving averages.

3. Stochastic oscillators to look for overbought and oversold conditions.

4. Pivot Points to look for potential support and resistance levels on shorter time intervals.

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