Markets never move in a straight line. They can rise, fall, bounce back, reverse, and, very often, trend. Thesemovements are called market swings. Understanding themmakes for some of the greatest traders.
Platforms that take advantage of short- and medium-termprice action, require you to master these components, to be able to build long-term profitable strategy. If you want to profit from either trading or investing, mastering marketswings is essential, even if many people don’t realise this. That is why today we decided to make a guide about usingthese dynamics, and building a strategy that could takeadvantage of them.
Market swings, and why they matter
Market swings are patterns where price moves either:
* upward (trending, making higher highs and higherlows);
All swing trading strategies rely on recognizing which oneof these 3 patterns you are currently in. Some traders can do it with just a side-glance, others meticulously drawmany lines on the chart. In either case, the challenge issimple: to understand which overall move you are currently in, and position accordingly. For example, if youhave determined that you are range-bound, you can beginusing a Bollinger Bands indicator. If the price touches thehigher band, you can short the market, taking yourchances that the price will again go inside the range.
If the price moves outside of Bollinger Bands, and staysthere for a while, you now know that your prior thesis isinvalidated, and in fact the asset has currently begun itsupward trend.
There are hundreds of these possible indicators, and thousands of strategies designed to play around them. Butthe good news is that you only need to select one (or a few) that you enjoy, and that suit your trading style, as well as the asset pair and the timeframe you’ve selected. Your range may widen later on, but starting slow, and having a solid understanding of one base strategy isalready more than the vast majority of market participantshave.
Imagine an American grandma that has invested in S&P500 for 30 years, for example. Does she need a strategy, did she ever plot a chart of a stock or an ETF? No, she is perfectly satisfied with her 7% yearly averagegains, and has never even entertained the idea.
That is why its not as wild as the Internet would make youbelieve, to imagine that having some idea about yourtrading conditions, thesis, and invalidations, will make youat least a little bit better than American grandma. Forsome, who we know as traders or portfolio managers, thiscan become their whole life: taking advantage of somemarket swings, that allow them to easily compound theportfolio.
Identify the trend, trade within the trend, understand whenthe trend is likely coming to an end. If you can manage to do that, there will be plenty of rich opportunities waitingfor you. Just have to decide where to take them, and howbest to profit.
You might think swing trading is next to impossible, but in fact, millions of people are doing it, and the number justkeeps growing. Industry is exploding. Not everybody has the time to watch charts like a hawk, catching 5-second moves. If you enjoy trading that is a bit more relaxing, youshould probably research swing trading, and learn its coreprinciples.
Some of the basic ones we’ll just state here:
1. swings repeat because human behavior repeats. Feargoes into greed, which goes into fear. Human natureis predictable, and can be exploited.
2. no swings last forever. Trends last until they don’t. Remember that ranges eventually are bound to break, and any momentum fades after a while.
3. confirmation matters more than specific prediction. The best swing analysis relies on confirming yourthesis. Waiting for proof, and only then executing thetrade. Guessing and blindly hoping works less thanyou would naturally expect.
One of the better platforms to do swing trading on isPocket Option. It works both on PC and mobile, and has quick trading mode, along with longer timeframe-wiseforex and shares trading. A wide asset list (FX, crypto, gold & commodities, stocks) allows to always have someswing patterns to choose from, and high execution speed isvery useful when entering at breakouts or reversals.
Pocket Option is well-liked for the amount of indicatorsthey have, even in mobile apps. They make it easier to mark support/resistance levels, chart trend lines, and spot market divergences. Trading is also available 24/7, through crypto, making swing setups available even whentraditional markets are closed.
Most of all, Pocket Option allows traders to practice forfree, without completing any verification or KYC, on a demo account. All the strategies can be tested and perfected, for any asset, without the need to send anymoney over, or do risky trades with real money.
You can try swing trading at Pocket Option for free through the app (iOS, Google Play) or thewebsite: https://pocketoption.com/
