What Is Swing Trading ?
Swing Trading refers to the strategy in which traders hold securities or assets such as stocks, cryptocurrencies, commodities etc. for few days to week aiming to earn profit from price movements. This trading strategy is ideal for those who cannot check or monitor market regularly.
Features Of Swing Trading
The main features of swing trading are as follows:
- It has short to medium holding period from few days to few weeks
- It emphasizes on price movements
- Traders can make profit from both upward or downward swings
- It does not require more time like day trading
- It is suited for disciplined and patient traders
Pros Of Swing Trading
The main advantages or benefits of swing trading can be highlighted as follows:
1. Flexible And Less Time
Swing trading is more flexible and consumes less time than day trading. There is no need of constant monitoring and regular checking. Therefore, it is less stressful trading strategy.
2. High Profit Potential
Traders can earn more profits than long-term investors because of consistent return. Traders can be benefitted from larger price movements.
3. Lower Charges
Transactions costs and commission charges are lower than day trading because of fewer trades. Therefore, swing trading increases the earnings.
4. Multiple Markets
Swing trading is applicable for multiple markets such as cryptocurrencies, commodities, stocks, stocks etc.
Cons Of Swing Trading
Major drawbacks or disadvantages of swing trading can be pointed out as follows:
1. Overnight Risk
One of the biggest drawbacks of swing trading is overnight or weekend risk. Traders may bear substantial losses due to unexpected news or market gap.
2. Requires Consistency And Effort
It requires patience, consistency and regular effort to become a successful trader. People who seek instant profit are not ideal for this trading strategy.
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3. Capital Tied Up
Traders may miss more profitable opportunities because their capital is tied up for some days or weeks.
4. Requires Knowledge
Traders should have the knowledge about market research, chart analysis, understanding the trends tracking positions etc. Therefore, new traders may have to face challenges.
