Trend trading can be done with various styles. That is one of its beauties. Another one is that it is married with the stop loss technique. If you trade the trend, it automatically means that there has to be some sort of stop for the exit. Otherwise this thing couldn’t be called trend trading.
Naturally trading the trend leads to an asymmetric entry and exit behavior. Most of the time the markets or individual stocks, commodities and currencies are not in trend mode. So, trend trading means timing and waiting for the entry, but not too long. In such a scenario entry and exit can be done by very different systems. Just for example, enter a trend on strong news that hints for more in the future and exit it by a trailing stop.
But there is also the symmetric entry and exit method. Typically this is called swing trading. While swing trading means also just trend trading with the time frame of a few days, weeks or even month, it could be interpreted literally. That is trading with long and short positions.
The very simple version is to pick one swingy thing, for instance a growth stock with a large PE multiple, and a market that is unsure about the growth expectations. On average such a stock may show an uptrend, but probably with wild swings. This is the horse that the real swing trader wants to ride. Trend traders also want to get on its back.
At this point trading software gets on the stage. There are neural trading programs that have a hardwired algorithm that is able to learn the pricing behavior of something that gets traded.
The other type of swing trading program is the real swinger, or oscillator system. It is also called indicator based trading. Typically these programs offer to backtest a trading algorithm that can be created and then finetuned by the trader. Both types of trading software generate buy and sell signals. It’s time to relax, trader!
The symmetric trading method, switching from long to short and back is also suited for the gut trader, the one who is doing it all manually. The reason is simple. Trading means for humans balancing on the small path to success in the middle of fear and greed.
A trader too anxious will pass on many good occasions. Probably he also has a stop that is too tight. Slowly but steadily his trading capital will be eaten up by the sharks of the market. The bold trader, hammering in any trading idea without thinking twice, will lose it all in one or few big bangs. Forex robots fall mostly in the second category. With a slight difference, of course. They even don’t think once.
The symmetric swing trading style gives a trader the mental support he needs. He has to be in the market anyway, so he can’t be too often or early in and he also can’t trade too seldom. The only thing he has to judge is, whether it is better to be long or short. Swing trading in the inner sense is for emotionally destabilized traders. Trading software is the other trick that can cure psychological trading problems.
You don’t know such beasts? Wake up you romantic trader, we all have them. Psychology is the single most important cost factor in trading there is, unless you are a program trader or a trading program. Often it is the difference between make it and break it.
Trading software has another advantage. The automatic trader will stick not only more disciplined but also more precisely to a chosen trading system and its algorithm, than a human trader could do it.
Swing trading is trend trading. The trends are just enclosed in swings. And trend trading can be swing trading. Trading with a program could mean leaving the trading decisions to this swingy piece of software and concentrating on the selection of the right horses. Choose the wild ones.
