So who is a swing trader?
If you aim to profit from short and medium-term volatile price actions over a few days or several weeks you are a swing trader.
Swing traders apply a risk/reward ratio in their trading plan with stop loss and profit targets, or they can take profits or losses based on a technical indicator or price action movements.
“If you aim to profit from short and medium-term volatile price actions over a few days or several weeks you are a swing trader”
WEALTH TRAINING COMPANY
Swing traders, short-term speculators who trade frequently rely on technical analysis in their decision-making
Swing traders differ from investors in that the investors have a long investment time frame and are less interested in daily price swings.
Swing trading is one of the most popular forms of active trading, where speculators seek intermediate-term opportunities using various forms of technical analysis.
What are the most useful technical indicators used by swing traders?
Swing traders watch the moving averages
The moving average (MA) is a stock indicator calculating the average price over a given time frame to disregard noise in price action.
The rising moving average indicates that the security is in an uptrend. Conversely, a declining moving average indicates a downtrend.
The four major moving averages used by swing traders are the 5, 10, 20, and 50-day moving average.
“Swing trading is one of the most popular forms of active trading”
WEALTH TRAINING COMPANY
Swing trading KISS with MA
We know of successful traders who take just two major moving averages and trade according to when the two moving average lines intersect. This trader ignores news, fundamentals, macroeconomic data, and any other technical analysis tool. The trader’s entire decision-making process is just two variables when the short time duration moving average line intersects and moves above the long-term duration, the moving average that triggers a buy position and vice versa.
Watching trading volumes is also popular with Swing traders. High trading volume in a given direction can be interpreted as a strong signal.
“A stochastic oscillator is another technical tool popular with swing traders” – Wealth Training Company
Relative strength index (RSI) is also a popular technical analysis tool
The RSI oscillator, typically measured over 14 days, fluctuates between zero and 100. The Relative Strength Index indicates oversold market conditions when below 30 and overbought market conditions when above 70.
A stochastic oscillator is another technical tool popular with swing traders
The stochastic oscillator is another momentum indicator widely used in forex trading to pinpoint potential trend reversals. This indicator measures momentum by comparing the closing price to the trading range over a given period.
The stochastic oscillator is based on the theory that the price of an asset tends to close near its highs during market uptrends and near its lows during market downturns.
But RSI, on the other hand, works by measuring the velocity at which the price of an asset moves.
For further information on swing trading and other trading strategies swing by the investment home study course.