As the name suggests, the swing trading method involves online trading platform by following the “swings” of the market, that is, its ups and downs. This stock market investment technique has already been used since the 19th century and is mainly applied in very short trading cycles. It is particularly appreciated by day traders and private traders, but its speed does not really adapt to professionals, whose negotiations are often very large. Generally speaking, swing trading involves following the back and forth waves in the stock market. It is about trading in the direction of the current, which can be up, down or stagnant. Depending on the trend displayed, the trader will then have the choice between a sell or a buy. The decision is made quickly, just at the right time.
Step 1: Determine the trend with Charles Dow’s theory
Dow Theory is the very basis of swing trading, making it easy to find the market trend. Its principle is simple: it is necessary to refer to the high points and to the low points of the course of evolution of the course, and if the tops and the troughs are more and more high, the tendency is upward, otherwise, in the opposite case , it is bearish. It suffices to establish a curve, using one of the analysis tools offered in trading.
Step 2: Study the impulses and corrections
Apart from a simple downtrend or uptrend, there are also impulses and corrections, which need to be considered. The impulses are when the curve shows a high top, but a low trough and the movements follow the direction of price movement. Corrections, on the other hand, go in the opposite direction and are often associated with position selling by investors. Most of the time, buying after corrections turns out to be a winner as prices fall before an uptrend resumes.
Step 3: Apply good money management
And finally, the last step is to clearly define your earning objectives and limit the risk of loss. As a general rule, the risk should not exceed 2% per trade. Caution is always required, swing trading will be easier to use on best trading platform in south africa than on a currency, for example. Using this technique on binary options once again requires mastery and a good knowledge of the assets being traded. We remind you that trading in the short term and in products with high volatility can entail great risks and losses. Before you get started with these techniques, don’t forget to do the preliminary market analyzes.
Choosing a broker for swing trading
The criteria to look at
Before choosing a broker to best online trading account uk via a swing trading strategy , it is essential to review some basic principles, valid for any trader activity:
- The user should only invest the money he does not need;
- Determine the desired financial goals;
- Apply reasonable money management;
- Train yourself to determine if the swing trading strategy is the right approach, depending on the stock exchange concerned: forex, CFDs, Stocks Markets, crypto currencies.
When these few items are verified, it is indeed important to choose a broker that perfectly meets the needs of users who apply a swing trading method. Future investors should pay special attention to these few intrinsic points of brokers before opening a real money trading account. eToro is a broker that offers a complete and affordable service on an intuitive platform.
Online trading is a very risky activity, due to the high volatility of the markets. This is why it is unreasonable to go public without having all the trading tools necessary to manage this risk. A good broker should offer their clients every flagship aussie forex brokers indicator: moving averages, RSI (Relative Strength Index), candlesticks, Fibonacci retracements and volumes. These indicators are very important for carrying out precise technical analyzes on a medium-term position (stocks, crypto currencies in particular) or on forex swing trading (beware of overnight fees).
Appropriate brokerage fees
For traders, the number 1 goal is to make a profit. It also involves reasonable brokerage fees which do not undermine the gains of the positions. This is an important point to watch out for before committing to a swing trading brokerage strategy. Positions, held open over several days, may incur fairly heavy additional commissions. A point not to be overlooked. CFD trading is suitable for scalping since it is inexpensive in costs with many brokers (including eToro) if you close your positions well at the end of the trading session. The stock or crypto market, with a broker who offers to buy real ones, is potentially more profitable in swing trading because it is little impacted by fees or commissions.
An educational resource center
Succeeding in online trading requires proper training in the various more or less advanced concepts inherent in this activity. Users should be able to benefit from swing trading training directly through the educational resource center offered by their broker. A good training allows you to understand the mechanics of the method (with swing trading definition for example), to know if it is made for you and to get the most out of it. The demo account is a very important option, which should not be neglected to train and test a strategy. The objective is to establish a coherent investment plan which allows to generate profits, with a graphical analysis with indicators of price movements.