Swing Trading
Swing Trading falls between the long-term buy-and-hold strategy and day trading. Swing traders will hold a position in stocks, currencies (Forex),
eminis, futures, and index trading for one or more days, but generally less than two weeks. Whereas, day traders will hold a position from a few seconds
to a few hours, but not overnight.
The main idea behind swing trading is to catch up or down price swings caused by daily or weekly price volatility. A market's up or down movement is
determined by whether buying or selling dominates the market. Markets tend to move in one direction from few days to several days and then the buying or selling
power exhaust itself, forcing the market into the opposite direction. The struggle between the buyers and sellers create the price swing, A swing trader aims
to take advantage of the price swings.
A predictive market trading algorithm or trading system is used for trading the price swings. The goal of trading algorithms is to remove the subjective
decision making from swing trading and to optimize the entry and exit prices. Identifying whether a market is currently trending higher or lower,
or trading sideways and when that trend will change are challenges for many swing trading and long-term trend following trading strategies.
Swing traders do not necessarily need perfect timing - to buy at the bottom, and sell at the top of price oscillations. Small consistent earnings that
involve strict money management rules can compound returns significantly. A good swing trading system can allow for greater earnings and faster compounding of the profits.
Large institutions such as mutual funds trade in sizes too big to move in and out of stocks within a few days. Whereas, the individual trader is able to exploit
the short-term price movements by getting in and out quickly; therefore, taking advantage of the price swings.
Dow Indicator's strategy of analyzing the 30 underlying stocks of the Dow Jones Index to determine the short-term directions of the markets
takes advantage of the power of swing trading.
