Swing Tading & Technical Analysis

The Swing Trading Approach

Swing Trading means a type of trading that takes advantage of the short-term trend of a financial asset. Swing Traders open positions that last from intraday to 4 trading days. Swing trading may be applied to all kind of financial markets: Stocks, Forex, Indices and Commodity Market.

Fundamental factors are completely ignored by swing traders and they are focusing exclusively on technical analysis. The news may seriously disturb the trend of an asset and that is why swing traders are avoiding to trade in days when important news will be released. Swing Traders may use also binary options to trade, more on binary options explained.

The Tools of a Swing Trader

Swing traders are trying to identify and take advantage of short price trends and repeated price patterns. They try to identify the current trend by using tools such are:

1) Moving Averages (in a great variety)

Swing traders may use a 50-minute average to trade or even to take advantage of the break of the 200-day average.

2) The famous MACD

MACD is a multi-moving-average trend model that is sensitive to the creation of new trends but it can’t identify overbought and oversold price levels. On its most popular setting, MACD is combining the 12-day and the 26-day moving averages while the trigger is deriving from the 9-day moving average.

3) The RSI (Relative Strength Index)

This is a very powerful technical analysis tool for day-traders. The RSI indicates overbought and oversold levels. Overbought levels are indicated by RSI>70 while the oversold levels are indicated by RSI<30. RSI can provide day-traders with the optimal entry and exit point levels.

4) The Fibonacci Retracement

The Fibonacci Sequence of numbers is very popular and very applicable in every financial market. The Fibonacci Retracement is used by traders that are trading trend reversals. The Retracement may indicate the correctional levels of a trend that is already reversed.

5) Other Technical Analysis Tools

Other technical analysis tools may be used as well. For example the Bollinger bands, the Alexander Elder's Model or the Average Directional Index (ADX).

Fast Execution Trading Activity

Swing traders may open and close positions in the same day and that is why they must act quickly to secure their trades. Therefore, swing trading is not applicable to large investors who execute very large sizes of orders.


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