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Trading
• Day trading
• Swing trading
• Trading techniques
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Swing trading
It is a trading technique that aims at detecting short and medium
term trends, from one day to a week. The aim is to position on
the value at the trend beginning to unbuckle the position at the
end of the trend.
Contrary to Day Trading, swing trading is not linked to the notion
of length, but only to the notion of performance. Swing trading
is one of the oldest trading methods; it had been used by old
traders like Gann and Taylor.
The principle of swing trading is to buy at the lowest price to
sell back at the highest price.
This method is based on the detection of trends and their use.
This technique enables to take position in a bull trend as well
as in a bearish one. Once a bull trend is detected, the investor
position himself on the purchase of the value, and he does this
just before the turning point of this trend. So, by taking position
he does not now when he will unbuckle his position, contrary to
Day Trading. This technique consists in buying the lows and selling
the highs in the case of a bull trend. In a bearish trend, the
aim is to sell short in a high position of the swing in order
to buy back when you are at the rock bottom.
Swing trading favours performance to length. As long as a trend
is not over, the position stays open.
There
are three basic configurations: either the market grows, or it
decreases, or it is in a lateral consolidation stage.
To buy in swing trading, it is necessary to operate in the sense
of a rising market or in a lateral consolidation. When it is a
sell it is the opposite. You must not go against the major trend
of a market. You must not buy on a decreasing market or sell in
a rising market. You must always buy when a market is growing
and sell when it decreases.
A swing trader must be an active investor who detects the trends
and the counter-trends developed throughout the evolution of a
share.
A share can take one of the two following situations: Trend or
Consolidation.
A trend can be bearish or bullish. A consolidation can also be
called a range. A consolidation characterises a stationary evolution
of the price. Statistically, a share is 70% of the time in a range
and 30% in a trend.
Therefore, the swing trader has to rapidly identify the shares
following a trend.
The main difficulty of swing trading is the detection of trends.
If you are not able to detect a new trend, you might constantly
be late on the market and buy at a high price to sell back at
a low price.
