Forex Swing Trading is a long-term trading style that requires the patience of the trader to hold their trades for several days. Classification of Forex trading strategies can occur according to the length time traders expect a winning trade to last in the Foreign Exchange Market. In recent times, swing trading has become very popular among retail Forex traders. The reason for this paradigm shift among traders is because Forex trading strategies are known to contain entry and exit techniques that need checking the chart only once or twice in a day. Such a relaxed schedule is indeed suitable for individuals with busy lives and full-time jobs. This article sums up the main points as to why traders should consider having swing strategies in their portfolio.
Swing Strategies Diversify a Traders Portfolio
It is quite challenging to grapple with a high correlation of strategies in the Foreign Exchange Market. Every Forex expert knows that finding low-correlated strategies to an existing portfolio is not an easy task. Swing plans, under normal circumstances, stay in the market for several days making the profit distribution dramatically different from intraday strategies. Achieving lower correlation happens in this way. The main reason why individuals trade Forex is to ensure that they leave the currency market having made substantial gains. For many in the Foreign Exchange Market, the combination of intraday and swing strategies is considered to be sufficient diversification.
Swing Strategies Assist a Trader in Reducing Drawdown
Novice traders are often scared of bigger draw-downs that swing strategies purportedly have. However, this fear unfounded as it is primarily from the inability to see the bigger picture when using them. Those who saw this issue from a broader perspective now know that the draw-downs of individual strategies do not matter- what matters is the draw-down of the whole portfolio as it makes the equity smoother. Low correlation is also necessary here because with low correlated systems the equity is more stable and draw-downs less. Traders are thus willing and ready to start trading live on a failing system.
With Swing Strategies a Trader Can Develop Their System
It is common to find that some markets do not allow a dealer to build a day- trading strategy. An operator is limiting themselves and their trading business if they fail to add swing trading strategies to their portfolio. Trading as many different markets has its benefits in one being able to diversify their portfolio and becomes a solution in fighting high-correlated systems. Serious individuals also need to consider the time investment; why spend hundreds of hours in a market trying to find a suitable intraday system? It is thus very pragmatic and necessary to add swing strategies to a trader’s portfolio to increase chances of making gains. As shown below in the database, out of over 400 trading systems, 60% of them are swing strategies.
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