Swing trading is by far one of the most popular forms of trading in the financial markets. But as with any type of strategy, there are pros and cons when it is used, and knowing them beforehand can be crucial in deciding whether it is an appropriate long-term strategy.
The advantages of Swing Trading
– Swing Trading allows you to take advantage of the natural ebb and flow of the markets. Financial markets do not always go in the same direction, and if you are able to take advantage of that, you can increase your profitability because in theory you will earn money when the market goes higher in the next few days, and then do a little more when the market goes down, which is bound to happen sooner or later.
– Being inside and outside the markets, more opportunities can be identified. If you look at any financial chart, you can see that there is almost always a clear long-term trend, but the market may not always be in a support or resistance zone. By being in and out of the market in a matter of days, (usually) you can make a profit, and identify other markets to be set up for trading. This allows you to diversify risk across the board, and tie up much less capital instead of constantly having to change the margin for new positions as new deals emerge. With Swing Trading, when you close your first position, you won’t have to deposit any more money into your account to cover the second one.
Stop Loss is usually smaller than long-term trading. The stop loss on a swing trade can be 100 pips based on a 4-hour chart, while a stop loss on a weekly chart based on the general trend will be 400 pips. This allows you to place larger positions instead of very low leverage positions through long-term trends.
– You have clear boundaries. In swing trading you are a more technically established trader, and as such, you normally have a specific area that you consider as a sign that the trade is against you. Because of this, you know exactly when the trade is not working and can limit the damage a bad operation can do. In the long run, traders usually have to make a big detour for the markets, while expecting them to go “with the basics”.
What is a Forex Scaling Strategy for Investment?
The forex scalping strategy is a trading methodology that uses the shortest time frames available for 1 minute, 3 minutes and 5 minutes periods. Forex Resellers focus on very small price movements and avoid volatility as a primary consideration. They look for trading positions that allow them to trade multiple trades in very short periods of time while targeting small gains of 1 to 5 points each time.
Scalping forex compared to traditional strategies
For example, while the main objective of a more traditional strategy may be to carry out three trades per day with 100 pips each as a target, a Forex scalping strategy would try to do hundreds of small actions in similar time periods, aiming for only 5 pips each time you trade forex. As you can see, the first strategy could produce a maximum profit of over 300 pips versus forex scalping which would be in the ideal range of 500 pips.
The greater the risks involved
However, in order to get the optimal results for a resale of this Forex strategy it implies that your users will have to risk more for pips than other strategies in order for the benefits to be worthwhile and to be produced using forex scalping. As such, this implies that investors must put at risk much more than 2% of their total capital for the investment; this form of investing violates the major concepts of higher risk and forex money management strategies.
When to use forex scalping?
Forex scalping strategy is usually recommended when trying to trade currencies during periods when trading patterns tend to be more predictable and volatility levels are much lower. As such, the time period normally chosen for this type of trading is between 17:00 and 9:00 CEST time during which major countries, such as the US, UK and Eurozone, usually do not release important economic data