The Perks of Swing Trading
Before we delve into the advantages swing trading can offer to a good trader, we must define exactly what swing trading is. Swing trading, in its purest form, is all about taking long term positions in a market. It’s basically the exact opposite of day trading, which is opening and closing trades within one day (or even within an hour).
Swing trading, or long term trading, offers many advantages to new and experienced traders. More often than not, new traders get bored really quickly and decide to jump into day trading because it’s obviously more exciting to be opening tons of trades every day. However, this often turns out to be a bad decision, as new traders don’t have the experience to handle such volatility and variance in the market.
This is the reason for this article! Let’s see exactly why you should be swing trading first, then maybe day trade here and there on the side.
The Advantages of Swing Trading
As we said, swing trading is all about taking long term positions in the market. One of the big advantages of swing trading is that it’s actually long term, which means you don’t have to make quick decisions all the time like you would on a day trade.
You can start trading H4 charts and only have to update your trades every 4 hours. That gives you a ton of time to study, work, have family time and so on.
Swing trading also relies on long term trends, which tend to be more reliable than short term time frames. You can get into a long trend and ride it for many months without ever looking back.
Finally, swing trading is extremely easy to back test. You can take pretty much any strategy, plot it on a H4-D1 chart, go a few years back in time and start testing. You can rely on the results you’ll get because the charts are clear and the trends are reliable. It makes it very easy for any trader to decide if a strategy is profitable or not.
Does Swing Trading apply to Binary Options?
Swing trading has been around for many years. Some might even argue that it was the first real form of trading, as back in the days where internet didn’t exist yet (I know, scary right?) the data gathering process took much longer than now, therefore it took a while to find trades and people tended to hold positions longer.
With the age of the internet came faster access to more data, and faster execution of trades. Spreads reduced as well, which drove a ton of traders to try and beat the market for a little bit of money many times per day – hence day trading.
Swing Trading and Binary Trading
With the recent apparition of binary trading, traders have been placing trades faster than ever. Some binary brokers offer expiries as low as 30 seconds, which literally means you could be placing trades every 30 seconds and make money.
The clash of the titans comes when you start to think about compiling swing trading with binary trading. Could it be possible to make profitable long term trades using binary options?
The answer is a quite resounding yes!
Swing trading is all about trends. Whether it is in the stock market, forex or in binaries, if you’re looking to place long term positions you have to look for the trend and adapt your position to it. Therefore it’s not unconceivable to build a strategy that revolves around finding a long term trend in H4/D1 charts and placing One Day expiries or longer on your binary trading platform.
Risks and Reward
The biggest risk you’ll encounter while swing trading in the options market is boredom. Be very sure to build a strategy that you know works (hint: backtesting!) and that you trust, or you’ll quickly go back to those potentially deadly 30 second trades.
The reward however is huge. If you play the trends well, you could pile trades up and make a ton of money following the herd of traders.