Position and swing trading. My strategy!
Many exchange traders prefer to trade long-term. It is convenient: less time is spent on transactions, there is no need to sit at the monitor, the profit can be significant - more than in intraday trading or scalping.
Swing Trading
Trade on fluctuations lasting 2-3 days or "swing trading" - A common tactic and suitable for those who do not have time to be in front of the monitor during the active hours of the trading session, and who, nevertheless, wants to profit from sharp price movements in both directions (as opposed to long-term strategies).
The essence of swing trading
Because swing trading is associated with carrying a position over to the next day, it may seem like an exit tactic rather than an entry tactic. Indeed, for some trades, intraday traders manage to find entry points so successful that they can be carried over to the next day, resulting in a profit/risk ratio of more than 10/1. But on average, A swing trader will work with wider stops and not focus on fast movements. It will be absolutely normal for him to enter a position and stay in it for 2-3 days until the price movement is finally realized.
Where do swing traders trade
Psychologically, this is a more comfortable style for those who do not want to work with short stops and a large shoulder. But there is a nuance: the number of trading opportunities for a swing trader is limited. For those who work in the foreign exchange market, for example, there is also the effect of instrument correlation. It can happen that almost all instruments will be locked in ranges for several weeks and the best deal in this case is to be out of the market (no positions).
That's why swing traders often choose to broad-based markets diversificationFor example, the American stock market. From the whole variety of instruments (there are several thousand of them) there you can always choose assets that are in a strong trend, ready to break through a large range, or that are near strong support/resistance levels. If the S&P500 or Russell2000 index rises, many issuers (stocks) can show good buy signals, including using conventional technical analysis.
How does a swing trader trade?
If an intraday trader follows the external background and how the market reacts to news, then swing trader already paying attention to long-term trends: are there signs of large capital inflows, is there an increase in volume/open interest, etc.
When a trader moves a position to the next day, it is important for him to be in sync with the major market drivers and to have a "major player" behind him. Therefore, preparation is very important for successful trading in this style. Execution tactics, on the other hand, can be quite simple and fit into a few candlestick patterns on the H4 chart.
Position trading
Long-term trading lasting 3-6 months is called position trading.
Nuances of position trading
At first glance, it may seem that the longer-term approach, the less profitable it is - compare the average turnover of a scalper and the turnover of a position trader. In reality, position trading has the highest profit potential among all the listed trading styles, and here's why.
- First, a trader who holds a position in the direction of a strong trend lets the market do all the work and protects himself from mistakes, wrong entries, missed trades, etc.
- Second, by building up profitable positions (adding volume to a position as it moves into profit), the trader can achieve a non-linear increase in profits.
Recall history. of the famous "turtles"The first step in the development of the new trading system was the development of the new trading system. Many novice traders with no experience were able to make significant profits simply by following the predetermined trading rules. Of course, the markets have changed since then and the "turtle" rules no longer work as they did before. However, big trends still occur 1-2 times a year on the chart of any asset.
How a position trader trades
You understand, of course, that a position trader must have an excellent command of fundamental analysis, an understanding of how more money and global supply and demand forces work. Further, a position trader's knowledge of technical analysis should also be quite advanced - not only for large timeframe charts, but also for short-term execution tactics.
No one knows exactly when the big trend will start, so A position trader makes many entry attempts: most of them will not be continued.
Thus, the trader of this style has a rather difficult task - to preserve capital on the one hand, and to be ready to enter the "going away train", accepting the risk, on the other.
Where a position trader trades
Position traders work mainly with markets that are able to generate meaningful movements throughout the year (measured in tens of percent). Currencies, for example, are more stable and rarely change by more than 10-20% per year. Commodity futures and stocks can give more meaningful returns.
For example, many stocks double in value over the course of a year. Commodity futures can show a 50% annual growth rate.
In any case, like swing traders, position traders are looking for diversification by markets. Given the infrequent nature of major moves, you need to take advantage of every opportunity and be there when a major price change can occur. Often the best opportunities come from short positions in stocks that are collapsing faster than they are rising because of the nature of this market.
Let's conclude
If you are just starting out in trading, the right thing to do is to study different markets and try different strategies. Perhaps you will find an instrument whose dynamics you will understand better than others.
Don't be afraid to try and make mistakes! The more mistakes you make at the initial stage, the faster you will gain the necessary experience. It is worth remembering, of course, that you can risk only those funds, the loss of which will not have a critical impact on your financial situation.
Recall also that we have already considered scalping strategy и intraday trading. Good luck and trade responsibly!