TREND TRADING VS SWING TRADING
Trend Trading Vs Swing Trading
Here we are discussing trend trading vs swing trading. Before we can definitively say that one is better than the other, let’s break down the differences – and also point out some similarities. Let’s commence by looking at trading frequency.
Swing traders enter and exit positions faster than trend traders
Swing traders aim to take advantage of short-term fluctuations in the general trend of a stock price. This means they can quickly get in and out of their station. Trend traders, on the other hand, lead the trend for months – patiently sitting on bearish spikes. As such, swing traders make far more trades over the course of a year than trend traders.
Trend followers trade less often because their positions bring higher profits. But make no mistake, the small profits a swing trader makes while a trend trader add up!
Swing traders take larger positions than trend traders
Swing traders take larger positions to compensate for the smaller profits they make from trading. Although you may only get 5-10% profit per trade, the large capital you invest makes it worth 5-10%. Trend traders, on the other hand, aim for higher profits. So, they can invest less capital and still achieve high profits.
Entry and exit strategies also differ
Another important difference between these two trading strategies is how to enter and exit a position. Trend followers are waiting for confirmation in the form of strong momentum indicators. Because they follow the broader general trend of the stock price, they don’t have to take as much risk and get in early. They may be waiting for a trend confirmation or a countertrend. Swing traders, on the other hand, seize the opportunity as soon as momentum and volume indicators show that the price is increasing. Timing is much more important for swing traders because they are only riding a short-term swing.
In Closing Positions Trend watchers wait months for the trend to reverse and begin to show signs of a price correction. They usually stop at a price point that they believe indicates a trend reversal. Swing traders, on the other hand, exit their positions as quickly as a few days after entry – or a few weeks at most. Because price action can be a bit more volatile on these shorter swings, most swing traders exit their positions using take-profit or stop-loss orders.
No matter what business style you ultimately decide on, one thing is for sure: you need the right tools in your arsenal to succeed. A reliable stock forecasting tool gives you access to information that allows you to trade with confidence.