Full swing trading strategy
Traditional short-term trading methods (scalping and intraday) imply mandatory closing at the end of the trading session, which on the one hand minimises risk but also reduces the potential profit. There is, however, a style of trading that combines both intraday and overnight trading - swing trading. Swing trading is fundamentally different from all other trading systems in that it involves anticipating market conditions rather than reacting to events.
What is swing trading in the UAE?
Swing trading is the best strategy in UAE, which is fundamentally different from all other trading styles in that it involves anticipating market conditions rather than reacting to events. The market is a dynamic structure and should be entered when the trend is obvious and the price is moving in a certain direction.
Swing trading is a style of trading in cycles.
A market cycle is a wavelike price movement from a local low/maximum to the next undefined high/low in the future, i.e. the time interval between two minimum and maximum values of an index, showing the performance/weakness of the stock market as a whole. Over the longer term, the price moves in response to extremely strong fundamentals, thereby creating market cycles.
Types of swing trading strategies
Trend swing trading
The principle: you trade a stock (Asset) in the direction of a long-term trend, but only after a wave of trades against that trend has occurred. In other words, you trade on a pullback in an uptrend (Buy) or you open a short position when the price rises in a downtrend (Sell).
Counter-trend (Return to Average) swing trading
The principle: you trade a stock (Asset) on the boundary of a trend break, i.e. on the boundary of a potential trend reversal, but only after it has slowed down and reversed in the opposite direction. This is important to understand, i.e. you are acting against the long-term forecasts of market participants.
Features of swing trading strategies in the UAE:
- Less time consuming, as traders use small timeframes - most often four hours. Many work on hourly timeframes or use even smaller timeframes.
- Entry and exit are set up based on the current market position.
- Swing trading does not require constant attention from a market participant. If you work on a 4-hour timeframe, you only need to look at the chart once every four hours.
When trading by means of swing trading strategies, it is possible to combine working and trading without detriment to each direction. In doing so, a market participant spends less effort. Go for it and have a good trade!
Advantages of a swing trading strategies stocks:
- More position holding time means less time for emotions and trading stress.
- You don't need to spend a lot of time in front of the monitor. Only 20-30 minutes a day will be enough to analyse the charts.
- Swing trading is good for you if you have a full-time job or study.
- Mid-term timeframes cause greater price fluctuations than those possible within a day.
- You can constantly catch swing trades in each direction, holding gains in profits and capital.
- Commissions are small because of the small number of transactions.
Disadvantages of a swing trading strategies stocks:
- Swing trading requires a combination of both technical and fundamental analysis to be successful.
- You will not be able to take profits from the entire trend, because you will close your positions before the first significant pullback.
- You will have to trade at night and at weekends.
- You will be in the market during important news releases.
- Sometimes unforeseen circumstances can cause the price to move sharply against your position.
- Swing trading is difficult during strong trends.
The principle of swing trading is that you trade a stock in the direction of a long-term trend, but only after a wave of trades against that trend has occurred. In other words, a swing trader trades a reversal of a stock's price rollback to the underlying trend. That is, a long position should be opened in an uptrend after a selling wave has occurred. A swing trader should enter a short position if a buying wave occurs in a downtrend.
Below we take a look at some of the easiest swing trading strategies to use on a regular basis.
Swing trading strategies stocks in the UAE:
- Ishimoku Indicator. This indicator can be used to create a simple swing trading strategy. A long position is opened on a bullish crossing and a short position is opened on a bearish crossing.
- MACD indicator. This is an indicator that follows the momentum, which can be used to open a position when two moving averages are crossed in a bullish or bearish direction. The tool also includes a histogram for additional visual analysis. A trade was closed on a short swing and a new trade was opened at the moment of a bullish crossover.
- RSI Index. It is an indicator of trend strength, which signals when an asset is extremely overbought or oversold. During sideways markets, the RSI can be a powerful profitable swing trading tool.
- Stochastic Indicator. This is an indicator which measures momentum. It shows a signal when the trend is drying out, but it also gives a signal to buy or sell with a bullish or bearish cross of the two lines. Here a short trade can be held until a bullish crossover occurs. A bullish crossover will open a long trade for another successful swing trade.
- Bollinger Bands. This is a unique tool, which limits the price movement to two bands. The Bollinger Bands are a simple moving average and two standard deviations of that moving average. Bollinger Bands can be used to measure overall volatility or lack thereof by widening and narrowing the two bands.
Swing trading strategies will suit you if you do not mind holding a position for several days. Most trades last from a few days to a few weeks. This means holding positions overnight and sometimes even over the weekend. To manage your risks, which will allow you to hold positions for longer, you should close your position before the weekend if you know that the market may be volatile. To trade swing day trading strategies, on average a trader needs no more than 30 or 40 minutes to review their charts during the day. So if you have a job or study, swing trading strategies are for you.
With swing trading strategies, calm and disciplined traders win. So if you want to make more trades and you are bored waiting for days, then this style of trading is definitely not for you.
Equity swing trading strategies can be characterised as professionalism bordering on art. In-depth knowledge of theory, knowledge of many trading tactics and the ability to quickly find non-standard combinations are the first requirements for a trader who chooses this style of trading. But to be really successful as a swing trader, you need to understand and feel the processes on the market. The cycle model, price models, volumetric analysis methods are areas that need to be constantly developed.
It is not easy to become a swing trader. But if you set your mind to it, after a while you will be able to get outstanding results under any conditions and with any tools.
How do I start swing trading - the best strategy in the UAE?
Without a broker, individuals have no direct access to the exchange. To trade swing trading strategies in the UAE, you will need to go through the procedure of opening a brokerage account in your personal cabinet. Most brokers offer a very simple procedure to open an account and you do not have to go to the broker's office, everything is done remotely. All you have to do is provide your personal details and confirm the registration process.
After registering you will be able to try trading without fear of losing your savings by opening a demo account. You do not have to be discouraged from trying out a demo account. A demo account gives you a chance to get priceless trading experience, learn how the trading platform works, and learn to manage your emotions by experiencing unexpected spikes in the market and unpredictable events, so that you will react less sensitively next time.
To start trading for real, you will need to fund your real account. It is easy to make a deposit. To do so, select one of the funding options offered by the system, and the money will arrive within a few days.
When trading with a swing trading strategy, you can also use the additional earning tool of leveraged trading. This is money that a trader can borrow from a broker specifically to open trades with high volume. Using borrowed funds you can increase profitability of deals by several times (the risks increase accordingly). Leverage can vary from 1:5, 1:20, 1:100.
Be systematic and do not get carried away. Stick to your strategy and control your risk. Have a successful investment!