What exactly is swing trading and what is trend trading – and are these the same as day trading? We take a look at the differences between trend vs swing trading and which might suit your trading strategy.
Trend traders, or position traders, operate on a ‘buy and hold’ approach where they ignore any periods of minor retracement and speculate that currency prices will follow a general trend. Trend trading can be a longer-term position, ranging from a few days to weeks or months or longer.
Trend trading certainly has its positives. It’s popular with new Forex traders and may the easiest method to learn. It’s a long play and as such can be less time consuming and less fraught than day trading, with minor mistakes being more readily absorbed into your overall position. On the downside, because your trades are typically open overnight there is always the risk that there can be price volatility in between you switching off your screen and checking it again.
Swing trading is a shorter term trading strategy from a couple of days to several weeks, focusing on trend reversals and retracements to enter and exit the market. This depends more on what the price will be doing within a minor shift in relation to its overall movement. For example, swing traders might enter on the minor downward swing of an overall upward trend on the expectation that the currency price will continue to rise.
There are many upsides to swing trading, including the fact that it can be quite easy to learn and may only require a few hours of attention per day. However, it can take some time to adapt to and you do need to spend time monitoring the markets. Discipline is a must, and it can take willpower to keep emotion out of your actions due to the more agile nature of your trades.
There is also the option of day trading, which is much more fast-paced and will typically involve making multiple entries and exits within each day before the market closes. This strategy can be more difficult to learn and succeed in, but on the plus side your trades are closed overnight and some traders find it suits their trading style.
Trend trading vs. swing trading vs. day trading
So which option is right for your trading strategy? That depends on elements including your attitude to risk, your starting capital amount and the time you can allocate to monitoring and analysing the market each day.
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