If you’re interested in getting involved in trading then one common problem you may be faced with is what exactly is the best kind of trading strategy? If you spend any amount of time searching online and you’ll find that there are several different approaches to trading financial markets. Some of the most common are day trading, swing trading, and buy and hold trading. So what’s right for you? Which one is the best overall? If you’re a beginner trader then you’d be strongly advised to do some homework to find out the differences between these three main methods and what it means for you as a trader. While each of these trading styles has their own advantages and disadvantages, I would strongly recommend that if you are just getting involved in trading then swing trading will be the best strategy to apply.
A very common trading style is day trading and this strategy is one that is considered short term. All trades that are done are open and closed within the same trading day. A trader may hold a trade open four seconds, minutes, or even hours. However, they never hold them open any longer than a trading day. The obvious that many to this method, or supposed advantage, is that by holding a trades for a very short amount of time you expose yourself to the least amount of risk. In theory this sounds logical, but in practice it is anything but a logical. The problem with trading like this is that most traders use very small timeframes and they’re actually trading noise and not the market. One such small timeframes trends can change in seconds, and this means that you can be very easily knocked out of position because the market suddenly turns against you. The result is that this method of trading usually increases the amount of risk instead of reducing it.
Another popular trading method is buy and hold trading. This strategy is long-term and traders usually open and hold trades for weeks to months. To use this strategy effectively you really need to have very deep pockets, and the only type of people who have pockets deep enough are large companies. This means that the individual or retail trader should definitely avoid this strategy because it means that you need to wait weeks and months and also need to be prepared to accept large drawdowns or losses as the markets gyrate and move around. This strategy is just impossible because you need a large trading account and need to be prepared to wait weeks and months to make any profit.
So what’s so good about swing trading compared to the above strategies and why should you even bother to learn how to swing trade? Swing trading is a mixture of the above to in that it doesn’t focus on the short term and definitely doesn’t focus on the long-term. Instead, this strategy is medium-term focused and trader is usually open and hold trades for anywhere from two days to a week. The advantage of this is that you not trading such a short frame time that your trading noise, neither are you trading such a large timeframe that you need deep pockets and must be prepared to accept large drawdowns. Because of this swing traders are aware of the trend and can identify correctly because they’re trading the medium term and not the short term which is nothing but noise. By trading with the trend is greatly increases your chances of entering into winning trades, and this is very good news for anyone who is just starting out with trading as looking for some way to increase their odds of winning.
Of course is trading Sun has its own advantages and disadvantages but if you do some homework and look around online you’ll see that the swing trading strategy generally leads to a much higher win loss ratio than any other type of strategy available. The other advantage is that swing trading follows very basic and sound principles that I believe all traders should observe and this includes identifying the trend and only trading with it. This is very sound advice to give to any beginners who are looking to get involved in trading forex, stocks, or just about any other financial instrument or market that there is out there today.