What happens in a swing trade?
Before we start enumerating the pros and cons of swing trading, let us first define what happens in swing trading. Traders use swing trading when they try to make a profit out of market swings anywhere from a single day or overnight up to several weeks. It is also a strategy to avoid losses when executed properly. One strategy is a stop-loss order. A trader must be alert and determined to monitor the market’s happenings, like price movement and trading opportunities.
How can a trader benefit from swing trading?
There are many advantages in using swing trading, and one of these advantages is the potential high profit. Written in the list below are some more reasons why a swing trader uses such type of trading:
- In actual. Traders can use swing trading in many forms and fields, such as different markets and instruments. Bitcoins, etherium, litecoin — you name it, you can apply swing trading or speculate.
- Easy learning. A trader can learn more if he wants to, and there are many ways to do that. Thanks to technological advancement, access to several resources is much more accessible. You can gain knowledge in just a few clicks on the computer. A trader can choose from ample materials when studying and learning, such as pdfs, ebooks, websites, and online videos.
- Multiple tools. Tools like candlesticks are used in platforms. There are also expert adviser software and automated bots that can help a trader have better swing trades than manual trade.
- Trader-dependent. When we say trader dependent, swing trading does not solely depend on the market itself or any price movement. It solely depends on how a trader knows the market. If a trader has the right skills, determination, and attitude, then there is a considerable possibility of bringing home high profits.
Second thoughts on swing trading
Swing trading does not come with advantages alone. It also has its fair share of disadvantages. Written below are some things that a trader should consider before using swing trading:
- Risk. Risk is normal, and any other type of trade or market comes with risks. Swing trading may look like a no-sweat activity, but in reality, it is not. If some make it look easy, then it is essential to know that it may just be plain luck or that person learned through mistakes or experiences that enabled growth.
- Consistent monitoring. This element is self-explanatory. Swing trading needs constant checking, and alertness is a must, unlike other trades like day trading. In day trading, the order expires as the market closes if the specified price is not reached. Therefore it is not executed. A swing trader may find it challenging to do other things like a full-time job.
- No tax exemption. A trader must ensure that he meets his financial system’s obligations as swing trading does not usually give tax exemptions.
- Risk management. It is essential to use an effective risk management strategy to avoid too many expenses.
- Trader-dependent. As we have mentioned, swing trading depends a lot on a trader. If a trader is impatient, swing trading might not be the best choice.
As a conclusion
This list of swing trading advantages, benefits, and risks may help traders discern if it is the best strategy suited for them. A trader has the liberty to choose and customize the way he trades as there are no fixed rules in trading.
