Difference between trend trading and swing trading
Answers
Explanation:
Financial markets are enormously complex, but most trading strategies tend to fall into one of two categories: trend following or swing trading. Each strategy has its advantages and disadvantages, as well as specific requirements that investors must follow consistently in order to avoid errors. However, many investors randomly apply these contrary strategies without understanding how that can undermine profitability. Identify whether you are a trend trader or a swing trader in order to hone your strategy correctly.
In theory, the trend trader takes risk in an uptrend or downtrend, staying positioned until the trend changes. In contrast, the swing trader works within the boundaries of range-bound markets, buying at support and selling at resistance. Swing trading tends to work best for shorter time frames, while trend-following strategies can be applied for months. However, the lines have blurred in recent decades due to the availability of real-time charting for all time intervals. (For more, see: What Type of Trader Are You?)
New and intermediate traders should choose one of these disciplines early in their market educations and stick with it until mastered or until they find out they're better suited to the other approach. Experienced traders can mix and match these strategies at will, often building highly effective hybrids that require strong discipline but produce excellent bottom-line results.
This dual effort works best for those with strong multi-tasking skills who can contain each strategy within its proper boundaries while adjusting risk management to address unique characteristics of hybrid strategies. For example, typical long-side swing trades require fast exits at resistance such as old highs, while trend-followers sit on their hands and allow securities to test and break those levels. A hybrid approach might be to sell half the position at resistance, keeping the other half in hope of a breakout