There are many different styles of traders in the Forex market. From day trading to long-term trading, the styles and approaches vary greatly among the large number of traders in the Forex market.
Swing trading (or momentum trading) is a trading style in which the trader holds open positions for a few hours up to a few days. This is very different from day traders who rarely hold an open position for more than a day. It is also different from long-term traders who can hold open positions for months. Swing trading is a considered a medium-term trading style.
Swing traders look for trends in currency price movement. Price direction is very important for swing traders. They hope to get in at the start of a trend or join a trend in progress in order to profit from significant price movements of currencies. However, recognizing that trends don’t last indefinitely, the swing trader will have clearly defined parameters for entering and exiting a trade.
Swing traders possess many of the same skills that day traders exhibit. However, they also have a broader perspective on the market. They perform extensive research and analysis, and are patient and disciplined to work within the parameters of their trading system. Forecasting is their strongest tool as they are seeking profits from the direction that a currency pair moves. They often have nail-biting sessions in which trades appear to be moving against them, then reverse and take them into profitability. Swing traders look for larger profits than day traders; they seek a minimum of 50 to 100 pips on each trade. However, they will take smaller profits if they accumulate quickly. If their trade enters their “loss zone,” swing traders will exit the trade without hesitation.
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