Wednesday, May 10, 2006

Swing trading vs. Intraday trading

My story. When i started trading forex i thought intraday is the way to go, make few pips close position and make next trade, but i remember one day when i looked at my forex account and saw that i made 20 pips i thought it's great but when i looked at chart i realised that when my take profit was hit, price moved more then 50 pips in my direction, needless to say i felt like a looser despite i made 20 pips, so i started to wounder maybe swing trading is better then intraday...

Well since then it is almost a year now and here is what i have learned about trading Forex intraday and Swing trading.

Let's egzamine Forex Swing Trading.

First of all when we look at any educational chart we can see that most of them are made on 4H or 1D interval, why is that you may ask? The anserw is simple all this technical indicators works best in long intervals, longer the interval is, more accurate indicator will be. We can also look at it from statistical point of view the more data we have, more reliable our tests are.

Trading long term means ofcourse less trades, and less trades means less spread. Face it spread is killer of most profitable intraday strategies, but when "swinging" you don't have to care about spread it if you make between 50 and 150 pips in single trade why care about 2 pip spread?

You don't have to make decisions right on the spot and don't have to click fast to get best price.
Once technical analysis done for 1D chart you have at least one week free of technicals.

Now for disadvantages, sometimees even when trading more then 10 currencies you don't have a single position open for a week or even month, that it is without a doubt bad. We trade Forex to make money not let them sleep and do nothing.

Trading quick currencies may be risky (when you do not set up take profit) i many times saw price moving 70 pips in my direction and then turn around and hit my stop loss in no time. and i couldn't actually do anything about it because i left my trades open, it doesn't matter that my prediction was good stop loss was hit and that is a fact.

More over when stop loss was hit and you have no open trades left there is always this feeling: "i want to get back there, i want to recover" but when swing trading clear GO signals do not happen often.

Now it is time for Forex Intraday Trading

It is somewhat like being a partizant, when opportunity occurs you attack take profit and run, i am not saying it is bad or good, it is just my feeling. Anyway i found out that intraday trading strategies easy to follow i mean you just look at 30M chart identify trend and place transaction, on the other hand when "swinging" you trade longer timeframe trend, it sometimes happens that when yor realize that trend has changed you already lost 10% of your account.

You can trade any day and any time it rarely happens that market is so slow that you can't even make 10 pips from it.

In fact trade signals are very often on 5M chart and unlike swing strading you don't have to worry that your money will be doing nothing at all, your money are working from monday to friday and that's the way it should be.

Ofcourse a lot of signals can mean a lot of transactions, but when you start losing then a lot of transaction means a lot of looses, it is often that when trader takes a loose he want to quickly recover unfortunetly when Intraday trading it almost always means another loose.

Last disadvantage, the biggest enemy when trading intraday is spread even if it small you have to pay a lot of it.

So this is it if you have any comments feel free to post it.


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