Day Trading & ScalpingSwing & Position Trading

Are You a Trend Trader or a Swing Trader?

Financial markets are enormously complex, but most trading strategies tend to fall into one of two categories: trend following or swing trading. Each strategy has advantages and disadvantages, as well as specific requirements that investors must follow consistently in order to avoid errors. However, many investors randomly apply these contrary strategies without understanding how that can undermine profitability. Identify whether you are a trend trader or a swing trader in order to hone your strategy correctly.

In theory, the trend trader takes risk in an uptrend or downtrend, staying positioned until the trend changes. In contrast, the swing trader works within the boundaries of range bound markets, buying at support and selling at resistance. Swing trading tends to work best for shorter time frames while trend-following strategies can be applied for months. However, the lines have blurred in recent decades, due to the availability of real time charting for all time intervals.

New and intermediate traders should choose one of these disciplines early in their market educations and stick with it until mastered, or until they find out they’re better suited to the other approach. Experienced traders can mix and match these strategies at will, often building highly effective hybrids that require strong discipline but produce excellent bottom line results.

This dual effort works best for those with strong multitasking skills who can contain each strategy within its proper boundaries while adjusting risk management to address unique characteristics of hybrid strategies. For example, typical long-side swing trades require fast exits at resistance, like old highs, while trend-followers sit on their hands and allow securities to test and break those levels. A hybrid approach might be to sell half the position at resistance, keeping the other half for a breakout.

Trend Trader Versus Swing Trader
Still confused about key differences between swing traders and trend traders? These trading characteristics below will help you identify your current approach.

  • 80-20 Rule (or Pareto Analysis) – Markets trend about 20% of the time and spend the other 80% grinding through trading ranges, pullbacks and other counter trend action that tests boundaries. Price rate of change rises in trends, attracting the trend trader and falls in trading ranges, attracting the swing trader.
  • The Big Picture – Trend traders watch broad economic, political and environmental issues that might impact position selection or risk management. Swing traders safely ignore these macro influences, focusing squarely on short-term price action.
  • Trade Frequency – Swing traders execute more positions but hold them for shorter time frames while trend traders execute fewer positions but hold them for longer time frames.
  • Position Selection – Trend traders own or short sell securities with the strongest uptrends and downtrends while swing traders own or short sell securities sitting at support or resistance levels.
  • Position Size – Swing traders hold larger positions for shorter time frames while trend traders hold smaller positions for longer time frames. Swing traders apply leverage more often than trend traders.
  • Position Timing – Swing traders seek perfect timing because average win or loss will be smaller than for trend traders, who can miss the beginning or end of a trend and still book substantial profits.
  • Entry Strategy – Trend traders enter positions while momentum is strong, or wait for a counter trend to lower risk. Swing traders take risk at support or resistance, fading the barrier by positioning in the opposite direction and placing stops where they’re proven wrong
  • Exit Strategy – Swing traders exit positions when stops are hit or profit targets are reached. Trend traders hold positions until the trend changes, regardless of time frame. They place stops at the price level that signals the trend change.

In Summary
Swing traders and trend traders execute market timing strategies that require different skill sets. While experienced players can successfully mix and match these strategies, new and intermediate traders should focus on one approach and stick with it until fully mastered

Alan Farley can be contacted at HardRight Edge

Alan Farley is a private trader and publisher of Hard Right Edge, a comprehensive resource for trader education, technical analysis, and short-term trading techniques. He is author of the McGraw-Hill best-seller "The Master Swing Trader", and popular columnist for The Street.com. Alan has been on the market scene for well over a decade as a trader, advisor, and author. He is a powerful lecturer on swing trading, including the original strategies and tactics found at Hard Right Edge.Alan is a frequent contributor to CNBC. He has also been featured in Fidelity Outlook, Forbes, Technical Analysis of Stocks and Commodities, Barrons, Smart Money, Futures Magazine, Tech Week, Active Trader, MSN Money, Technical Investor, Bridge Trader, Online Investor, America-Invest, the Los Angeles Times, and Trading Markets. He consults regularly with industry leaders on the issues facing today's traders, and is a strong voice for the revolution changing our modern markets.

Alan Farley is a private trader and publisher of Hard Right Edge, a comprehensive resource for trader education, technical analysis, and short-term tr...

piphoe

Legendary member
10,038 194
I bought his book a few yrs back, it's a good book even today. Actually, every once in a while I break it out & dust it off. Good reading. No holy grail (nothing is)but this book is good honest intro of various methods & principles. It even suggest a few that I wouldn't do without due diligence but it gets the juices and ideas flowing. Helped more that a little when i was trying to put it all together.
 
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tomorton

Legendary member
7,317 982
As ever, really clear thinking from Alan Farley. We can't know what the market will do tomorrow, but we have to know today what we will do about it.
 
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foroom lluzers

Veteren member
3,611 135
Which is more profitable ?

https://en.wikipedia.org/wiki/Richard_Dennis

THE ORIGNAL TREND TRADER

Dennis managed pools of capital for others in the markets for a while, but withdrew from such management in the spring of 1988 after his clients suffered heavy losses. In the Black Monday stock market crash of 1987, he reportedly lost $10 million,[8] with a total of $50 million reportedly lost in 1987–1988.[2] In 1990 his firm settled investor complaints of his failure to follow his own rules, for over $2.5 million, without admitting or denying any wrongdoing.
 

foroom lluzers

Veteren member
3,611 135
no I trade opposite to the crowd.
I trade supports on indices .
 

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