Forex trading is all about adapting to the market conditions especially in a volatile one. Today traders are moving from day trading to swing trading to manage risk and maximize returns.
This article will go into details of these strategies and how to navigate a volatile market with smart decisions.
It's pretty simple: it means buying and selling within a day. Traders are looking to profit from short term price movements and market fluctuations for quick profits.
This means making dozens or even hundreds of trades in a day for small profits per exchange. Scalpers hold positions for a few seconds to a few minutes for small price movements.
With a highly liquid pair like EUR/USD, a scalper might enter and exit a trade in seconds if the bid-ask spread narrows or a small price movement happens.
Traders look for currencies that are moving big, up or down, due to news or market sentiment. Let's say if a major economic report comes out better than expected, a trader might buy the currency thinking it will go up further. It requires real-time data and ability to execute trades fast.
In a volatile market, currencies tend to trade within a range. Traders discern the levels of support and resistance, making purchases at the former and sales at the later.
If the USD/JPY fluctuates between 110.00 and 111.00, for instance, you may purchase at 110.00 and sell at 111.00.
Day traders must be alert and quick, as they rely on small price movements and high leverage to make profits. With leverage of 100:1, a trader with $1,000 can control $100,000 worth of currency and make big gains or losses in a flash.
Pros of Day Trading
Quick profits in a day.
Easy entry and exit due to high market activity.
No Overnight Risk
Cons of Day Trading
Requires constant market monitoring and quick decisions.
Frequent exchange means hefty fees.
Limited Opportunities
Choosing the right forex account is important to trading. You can get started by exploring Justmarket’s Forex accounts types.
Standard accounts have good spreads and leverage for those who make quick daily trades. Cent Accounts are good for beginners with a smaller budget because they allow transactions in smaller units.
If you don’t want overnight fees, Swap-Free Accounts are the way to go, especially for those who follow Islamic finance. Choose the right account, and you’ll trade smarter and more efficient.
Swing exchange is the practice of maintaining holdings for days or weeks in anticipation of medium-term price changes. This is less intense than day trading. You can ride the trend without the daily noise.
Swing traders follow the trend. In this scenario, if the GBP/USD is trending up, they will hold a long position for several days to ride the trend. They use moving averages and trendlines to confirm the trend.
This is trading against the current trend, meaning you are expecting a reversal. For example, if the EUR/USD is trending down but shows signs of exhaustion or divergence on the Relative Strength Index, a swing trader might go long to expect a reversal.
Swing traders watch for moves away from important levels of support as well as resistance. A break above barrier can mean it's time to buy, and a break below support can mean it's time to sell.
If the AUD/USD breaks above 0.7500, a swing trader might go long to expect a new up move.
Pros of Swing Trading
Less monitoring and decision-making.
Fewer transactions mean lower fees.
It can capture more significant price moves over time.
Cons of Swing Trading
Longer holding periods require patience and discipline.
Exposure to market gaps and overnight events.
Timing entry and exit can be tricky in a volatile market.
A trader who used to day trade the EUR/JPY pair found day trading in 2024 too stressful and unpredictable.
With the increased volatility, they decided to switch to swing and focus on the bigger trends driven by economic events, such as interest rate changes by the European Central Bank.
The trader saw a big upmove in the EUR/JPY and decided to go long, entering at the pullback around 129.50 and targeting 131.50. By using swing trading, the trader can avoid the noise of daily fluctuations, focus on bigger trends, and get a more stable and profitable experience.
Swapping from day to swing trading requires a change of mindset and strategy. In a volatile forex market, the swing method is a more relaxed and potentially profitable strategy.
By trading longer-term trends and choosing the right account type, you can navigate the market best. If you want to refine your plan, try the Forex account types at JustMarkets.
This approach, combined with proper market analysis and risk management, will get you more consistent exchange in Forex.
