What is Forex Swing Trading?
February 2, 2009 by admin
Filed under Forex Systems
What is Forex Swing Trading?
Some Forex traders try to make quick profits within a few minutes in what is known as Scalp Trading. (See the getforexhelp.com article on Scalp Trading). In Scalp Trading, investors try to identify a quick trend and enter into and out of a trade position within a few minutes. Swing traders, on the other hand look for trends that will last a few days or a few weeks. Instead of trying to rack up a great deal of quick trades, swing traders will look for optimal conditions to take advantage of market volatility to make only a few trades and then exit after they’ve paid off.
There are a few advantages to swing trading. One is that profits can be ridden out. In scalp trading the idea is to make many small profits and let them add up. Even if the currency appears to be going in the right direction, the scalp trader exits quickly to ensure the quick profit. With swing trading, a position can be held longer and profits can be ridden out until they begin to trend in the other direction.
Another advantage to swing trading is that it is much easier to beat the spread between the buying and selling prices of the currency because over a period of days or weeks, the prices should move beyond the small difference in the spread. With scalp trading, the currency pairs have to move beyond the spread consistently to make any money.
One factor that is present in swing trading that isn’t present in scalp trading is that you have to be more conscious of fundamentals. If you are hoping to follow a trend for a few days or weeks, you’d better be betting with the fundamentals and not against them. Otherwise you will be taking a big risk. In scalp trading, this isn’t such a big deal and you can make a profit without being concerned about fundamentals.
So when should you swing trade as opposed to scalp trade? Swing trading is good when a market is going sideways and you can just follow the trends as a currency moves up and down. But if the currency is appreciating or declining swing trading becomes much more difficult because you can’t count on it staying within a specific range. The only problem is, you can only guess if a market is going up, down, or sideways and you may not know until after the fact.
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