WHAT IS SWING TRADING?
Swing trading is the trading strategy where a position is kept open for more than a day, up to several weeks. The purpose of this strategy is to attempt to capture short to medium-term gains in any financial instrument. Swing trading requires patience as you won’t be able to claim profits immediately. Read below to find out the best time frame for swing trading:
POPULAR SWING TRADING TIME FRAMES
Different swing traders use different time frames depending on the strategy they use for their trading. Each time frame has its own benefits and drawbacks. Here are the most popular swing trading time frames:
HOURLY TIME FRAME
Day traders use the 60-minute chart less frequently than other intraday time frames yet it is still considered an intraday time frame. This is due to the fact that a single trading session only comprises of a few intervals of 60 minutes each. The 60-minute time frame is frequently utilized by swing traders in order to zoom closer into the chart. It is a wonderful window of opportunity for more accurate planning and carrying out orders. Higher lows and higher highs are simpler to identify in this chart. Swing traders are also able to spot shifts in trends more quickly.
DAILY TIME FRAME
The daily time frame is the preferred time frame for all swing traders. All major trading platforms frequently give free historical data for 10, 20, or even 30 years on a daily time period. It might be comforting to focus just on the fundamental trend when evaluating the daily time period. Combining research with any other time frame is useless because so many investors who examine higher time frames spot new highs, trend line breakouts, and a variety of other setups. Without an intraday chart, you may study intraday price behavior using candlestick charts on a daily time period. That is very clever, and it saves both time and money.
WEEKLY TIME FRAME
Weekly charts offer a clear view of the general health of the trend. Simple rules can be defined, such as “the uptrend is maintained as long as the previous week’s low is not breached.” That is absolutely correct. Take a weekly chart of your favorite stock and place another lower time frame alongside it. Examine price movement in lesser time periods in relation to the weekly time frame. In many circumstances, the smaller time frame will follow the direction of the larger time period. This is especially true for larger swing trading time frames, since organizations, automated trading algorithms, manually operated swing traders, and a wide range of other market players keep an eye on such price levels.
WHY THE DAILY TIME FRAME IS THE BEST?
Many swing traders prefer to use the daily time frame over any other time frame. There have obviously got to be some reasons that make this strategy really popular. Here are the top reasons why we believe the daily time frame is the best for swing trading:
One of the greatest things about trading on the forex markets is that you can choose whatever time frame you want. This can be anywhere from a five-minute chart to a yearly chart. However, that doesn’t necessarily mean that all these time frames are good for you. I find that the daily time frame works the best and is most commonly used by swing traders worldwide. Even if you aren’t just a swing trader, you can use the daily time frame for all sorts of strategies and investment scenarios like mutual funds and the scalping strategy. Swing trading requires looking at a longer point of view as you’re going to be keeping your position open for a few days at the minimum. Therefore, it just wouldn’t make sense to use the minutes’ time frames as they don’t look at the bigger picture. Similarly, you can’t use the monthly or yearly time frames either as those become too big since swing trading only requires you to keep your position open for a couple of weeks at the maximum.
If you’re a swing trader, chances are you don’t like staring at the screen all day. We leave that task for the scalpers of this industry. Therefore, using any of the minutes’ time frames like 5-minute and 15-minutes time frames would be too much work as you’d have to be staring at the screen all day. As a swing trader, you’ll be focusing on a larger time frame as the swing trading strategy requires you to keep your positions open for at least a couple of days. Therefore, a daily time frame is much more suitable and time-efficient for you as you wouldn’t have to be on the charts all day as the candlesticks will change per day instead of per minute. This time frame is, therefore, more helpful in performing the swing trading strategy.
Understanding the market behavior is crucial for any trading strategy but especially the swing trading strategy. This is because you’re going to be keeping the trade open for a couple of days up to a couple of weeks. It’s difficult to interpret the market behavior in a smaller time frame like the daily time frame since there is very random behavior in each candlestick. Similarly, the monthly and yearly time frames are way too big for the swing trading strategy. This is why the market behavior for swing trading is best interpreted through the daily time frame.
VARIETY OF STRATEGIES
Last but not least, we understand that not everyone uses just the swing trading strategy. Many of us use several different strategies in order to gain considerably from the forex market. The best thing about the daily time frame is that it can work with all sorts of strategies not just swing trading. Therefore, you wouldn’t have to keep switching between time frames for each strategy you use as the daily time frame will work with all of them really well.
The best time frame for swing trading is the daily timeframe, and this article has a lot of points to back up this claim. But if we had to pick the top two reasons why you should trade with daily bars, they would be that it takes much less time and there is a variety of great trading strategies. In fact, once you find a swing trading strategy that works the best for you on the daily charts, there’s no one to stop your profitability.