3. Swing trading strategy, Trading strategies every trader should know
- Swing trading strategy
The term ‘swing trading’ refers to trading both sides on the movements of any financial market. Swing traders aim to ‘buy’ a security when they suspect that the market will rise. Otherwise, they can ‘sell’ an asset when they suspect that the price will fall. Swing traders take advantage of the market’s oscillations as the price swings back and forth, from an overbought to oversold state. Swing trading is purely a technical approach to analysing markets, achieved through studying charts and analysing the individual movements that comprise a bigger picture trend.
Successful swing trading relies on the interpretation of the length and duration of each swing, as these define important support and resistance levels. Additionally, swing traders will need to identify trends where the markets encounter increasing levels of supply or demand. Traders also consider if momentum is increasing or decreasing within each swing while monitoring trades.

Swing trading strategy tips
During strong trends, it’s possible to use retracement swings to enter in the direction of the trend. These points are also referred to as ‘pullbacks’ or ‘dips’ in an existing trend.When a new momentum high is made, traders will look to the highest probability trade, which is usually to buy the first pullback. However, when a new momentum low is made, traders tend to look to sell the first rally.Use our pattern recognition scanner to identify chart patterns as part of technical analysis.Read our article on strategies for swing trading stocks to help guide your own strategy.
Benefits of swing trading
It’s viable as a hobby. Swing trading can be more suitable for people with limited time in comparison to other trading strategies. However, it does require some research to understand how oscillation patterns work.Many trade opportunities. Swing trading involves trading ‘both sides’ of the market, so traders can go long and short across a number of securities.
Drawbacks of swing trading
Overnight risk. Some trades will be held overnight, incurring additional risks, but this can be mitigated by placing a stop-loss order on your positions.It requires ample research. A lot of research is required to understand how to analyse markets, as technical analysis is comprised of a wide variety of technical indicators and patterns.

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- Day trading strategy
Day trading or intraday trading is suitable for traders that would like to actively trade in the daytime, generally as a full time profession. Day traders take advantage of price fluctuations in-between the market open and close hours. Day traders often hold multiple positions open in a day, but do not leave positions open overnight in order to minimise the risk of overnight market volatility. It’s recommended that day traders follow an organised trading plan that can quickly adapt to fast market movements.

Just before the open of the FTSE and other European markets, traders should look to study the support and resistance levels and the possible reactions to the previous night’s trading in the US, as well as moves that have occurred in the Far Eastern markets. Many traders look to trade European markets in the first two hours when there is high liquidity. Otherwise, traders usually focus between 12pm – 5pm GMT when both the UK and US markets are open.
Benefits of day trading
There is no overnight risk. By definition, intra-day trading requires no trade is left open overnight.Limited intra-day risk. A day trader only opens short-term trades that usually last around 1 to 4 hours, which minimises the likelihood of risks that may exist in longer-term trades.Time flexible trading. Day trading might suit people who desire flexibility with their trading. A day trader might enter 1 to 5 positions during the day and close all of them when objectives are hit or when they are stopped out.Multiple trade opportunities. A day trader can make use of local and international markets and can open and close many positions within the day, including taking advantage of 24/7 forex market hours.
Drawbacks of day trading
It requires discipline. Similar to other short-term styles, intra-day trading requires discipline. Traders should utilise a pre-determined strategy, complete with entry and exit levels, to manage their risk.Flat trades. This is when some positions do not move within the day, which is to be expected.
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