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Both swing and position trading are based on the concept of following the trend. So, the main idea here is to forecast the possible price behavior in the longer-term and place a relevant order. However, these approaches differ by the duration of trades. In a nutshell, position traders hold their deals open for longer periods than swing traders. But surely, there are some other differences.
Position Trading
It is a trading approach intended for a long term. Usually, traders hold their positions for months, sometimes even years. That is, this strategy is for patient traders who can display self-control and wait for the result. It can be opposed to day trading where investors aim to profit from every price fluctuation. Unlike them, position traders ignore short-term market corrections and trend reversals. As a rule, position traders rely on the fundamental analysis and macroeconomic statistics that can help to determine the longer-term perspective of a trend. The technical analysis can be also of use, as based on historical patterns, traders predict what investments will bring the desired results and what would be the best entry and exit points.
What are the pros and cons of position trading?
Perhaps, the biggest advantage is that position trading does not require constant monitoring of the market situation, thus exerting less pressure on a trader. Besides, the level of stress is also lower because position traders barely react to any minor price fluctuations. On the flip side, long-term trading requires significant capital investments. Traders who expect to obtain certain results in the future should be ready to top up their accounts in order to maintain their positions open. Besides, nobody is insured against market turmoil that can cause sharp trend reversals. Consequently, the expected scenario may become invalid, and a long-term trade may incur dramatic losses.
Swing trading
In terms of duration, swing trading is something between day trading and position trading. That is, swing traders usually hold their deals for longer than one day but rarely more than a month. Fundamental analysis is of great importance for swing traders as it usually takes several days for the price to react to any macroeconomic or corporate changes. As seen by its name, the swing trading relies on chasing market swings which are the cases when a price undergoes rapid directional change during the periods of high volatility. That is why swing traders aim to buy near support levels and sell near resistance as well as trade the bounces and breaks. In this regard, Moving Averages are often used by swing traders in order to define the support and resistance levels.
What are the pros and cons of swing trading?
Swing traders open deals more frequently than the position traders, so this helps them to seize more trading opportunities. Besides, swing traders don’t have to worry about a sharp reversal of a long-term trend as they don’t hold their deals open for too long. On the other hand, this approach carries a risk of a sharp overnight price change, i.e. a price gap which can cause significant losses. Besides, a break or rebound from support or resistance levels can turn out to be false which may also entail losses for swing traders.
Position Trading
It is a trading approach intended for a long term. Usually, traders hold their positions for months, sometimes even years. That is, this strategy is for patient traders who can display self-control and wait for the result. It can be opposed to day trading where investors aim to profit from every price fluctuation. Unlike them, position traders ignore short-term market corrections and trend reversals. As a rule, position traders rely on the fundamental analysis and macroeconomic statistics that can help to determine the longer-term perspective of a trend. The technical analysis can be also of use, as based on historical patterns, traders predict what investments will bring the desired results and what would be the best entry and exit points.
What are the pros and cons of position trading?
Perhaps, the biggest advantage is that position trading does not require constant monitoring of the market situation, thus exerting less pressure on a trader. Besides, the level of stress is also lower because position traders barely react to any minor price fluctuations. On the flip side, long-term trading requires significant capital investments. Traders who expect to obtain certain results in the future should be ready to top up their accounts in order to maintain their positions open. Besides, nobody is insured against market turmoil that can cause sharp trend reversals. Consequently, the expected scenario may become invalid, and a long-term trade may incur dramatic losses.
Swing trading
In terms of duration, swing trading is something between day trading and position trading. That is, swing traders usually hold their deals for longer than one day but rarely more than a month. Fundamental analysis is of great importance for swing traders as it usually takes several days for the price to react to any macroeconomic or corporate changes. As seen by its name, the swing trading relies on chasing market swings which are the cases when a price undergoes rapid directional change during the periods of high volatility. That is why swing traders aim to buy near support levels and sell near resistance as well as trade the bounces and breaks. In this regard, Moving Averages are often used by swing traders in order to define the support and resistance levels.
What are the pros and cons of swing trading?
Swing traders open deals more frequently than the position traders, so this helps them to seize more trading opportunities. Besides, swing traders don’t have to worry about a sharp reversal of a long-term trend as they don’t hold their deals open for too long. On the other hand, this approach carries a risk of a sharp overnight price change, i.e. a price gap which can cause significant losses. Besides, a break or rebound from support or resistance levels can turn out to be false which may also entail losses for swing traders.
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