Sunday, April 22nd, 2007
Trend trading versus swing trading
I’m always debating the merits of swing trading versus trend trading.
Swing trading is designed to catch a ‘swing’ within the main trend and profits are taken withing days or weeks.
Trend trading means holding on to a position as the whole trend plays out over weeks, months or even years.
Here is a short list of pros and cons of swing trading:
PROS:
1. Taking profits regularly is psychologically satisfying and reinforces success
2. Taking regular profits allows you to compound earnings
3. For beginner and intermediate traders, more frequent trading accelerates learning
4. Drawdowns are less because you don’t have to ride out counter-trend moves
5. There are always swing-trading opportunities
CONS
1. Frequent transactions increase brokerage and slippage costs
2. Swing trading is more time consuming because you’re constantly looking for trading opportunities
3. There are no tax breaks on capital gains for short-term positions in most countries
4. You miss the really big moves and opportunities for massive profits
5. Constant trading is psychologically draining (particularly if you have a job)
This entry was posted on Sunday, April 22nd, 2007 at 10:30 am and is filed under Trend following. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
