When you first start learning how to become a forex trader, day trading may appeal to you. But it’s possible that watching the market all day and making very fast decisions is not the best way for you to trade.
If you are more of a strategic thinker and like to spend some time planning each trade, swing trading may be for you. Swing traders trade the oscillations that happen within longer-term trends and trading ranges. Typically, a swing trader will hold a position for anywhere between 1 and 5 days, though it can be longer than that.
Swing trading is most common for stocks but can be used for any instrument. Like day trading, swing traders rely mostly on charts and on trying to gauge sentiment, though they may look at fundamentals and relevant news as well.
A swing trader is mostly interested in finding the level at which a stock or forex pair may reverse within a channel and move in the opposite direction. To do this they are going to use support and resistance levels, trend lines and oscillators. Swing traders often use Elliott Wave analysis to map out potential scenarios. They are also very interested in market sentiment and trying to gauge how the market feels about an asset and how or when that may change.
Swing traders don’t need to spend as much time watching the market but do need to put in a few hours analysing charts each week. When it comes to executing trades, this can be managed using prices alerts and a mobile phone. While a swing trader doesn’t need to watch the market all the time, they do need to be in touch with the market at all times.
Swing traders need more capital than day traders and also need to be able to ride larger swings in their profit and loss (P&L). As a swing trader, you don’t get to go home with no positions at the end of the day, which can be stressful.