Swing trading is one of the most popular styles of trading amongst professional traders because they know that trading for the long term and not the short term is the only way to make consistent returns when trading any market. It doesn t matter if you trade forex, stocks, precious metals or any other market, the only way to get a true trading edge is with a swing trading strategy. Here in lies the problem. What strategies are the best for a new trader if they want to embark on a trading career. There are two basic styles or strategies for how you can implement this style of trading. The first is to be a trend trader and the second is to be a counter trend trader. Neither of the two are right or wrong, as you will need to practice with both of them to see if one is more suitable than the other.
Swing traders that go with the flow or the market trend are the most dominant traders. Why is this strategy the most popular? What does going with the trend offer that other strategies don t? Trading with the trend greatly increases your odds of entering into a winning trade because you are following the smart money. It is believe that the smart money knows where the trend is going. Since the majority of money made in markets is by those who know the direction or the trend, it makes sense that if you know where the smart money is going you should probably follow it. By doing this you will see your ratio of winning trades increase significantly. The common tactic employed by trend trading swing traders is that they wait for price to finish any retracements or pullbacks and then they enter into the market just as price continues on with the trend and performs its next swing. This way you get in at a good price and are going with the flow of the market, increasing your chances of having a winning trade.
If you like to live life on the edge or don t mind a little risk, then counter trend trading is also an alternative swing trading strategy. This strategy takes the opposite approach of trend trading and a trader will enter the market against the trend. Just why would they do this? Counter trend trading can prove to be very profitable, provided you know when and where the market is going to turn and retrace or pullback against the current trend. Entering into the market works in a similar way as trend trading. You must find a point in the market where price is exhausted or appears to be stalling and losing momentum. You would enter at this point because it is expected that price has run out of steam and is about to go against the trend and retrace. This strategy can take some time to master and is much more difficult to implement.
Two of the most popular swing trading strategies are trend and counter trend trading. Swing traders that trade with the trend typically enjoy a higher ratio of winning trades as their trades are going with the flow and face a much lower chance of entering into a bad trade. Counter trend traders typically have a higher loss ratio but their trades can prove to be extremely profitable thanks to entering the market just before major pullbacks or retracements. Which strategy works best for you will require you to test and practice with both to find out what is suitable to you as a trader.
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