Swing trading is an interesting topic for me and I thought why not write an article on the same. I do a lot of swing trading, especially with Hive. My intention is mostly to not worry about the outcome. I just sell and wait for it to go down and buyback. If it goes high, I'm still happy that there is no harm in cashing out my profits. I do the same with buy and sell as well. I buy low and wait for the opportunity to sell high. Sometimes it goes down and I don't care because the Hive price I believe is supposed to be over 1$ and if we can grab something below that, it is our risk.
Swing trading, like any other trading strategy, involves risks that traders should be aware of. In this article, I'm going to be discussing the top 5 risks involved in swing trading.
As always markets are highly unpredictable. Nobody can predict the price movement. Sometimes it can be good and sometimes it can be very bad. Swing traders are exposed to market risk, which is the risk of price movements in the market. The price movements can be affected by a wide range of factors, such as economic news, geopolitical events, and central bank policies. We should have some basic understanding of the market in which we are doing the swing trades. I would recommend doing it on a coin that you are very familiar with.
Volatility
We might have thought that the price of a particular token is very good and we could sell it and buy it back when it goes down. Swing traders are also exposed to volatility risk, which is the risk of large and sudden price movements. Volatility can be caused by unexpected news or events, or by changes in investor sentiment. We might end up losing a good opportunity to sell high because of a volatile risk and we would have sold our holdings too early.
Liquidity
Have you been in a situation where you bought something but did not get a chance to sell it for a good price? That's all because of liquidity. The price might look very good but we may not be able to sell our holdings because that would crash the market or there may not be enough liquidity. It is hard to do swing trades when there is low liquidity. Swing traders may also face liquidity risk, which is the risk of not being able to enter or exit trades at the desired price. This can occur when there is low trading volume or when there is a sudden increase in volatility.
When we are doing Swing trades we have to be proactive and not be greedy. Sometimes we might lose an opportunity because of greed and sometimes we even end up at a loss because we did not react fast enough. Swing traders need to execute their trades quickly and efficiently to take advantage of short-term price movements. However, there is always the risk of execution errors, such as entering a trade at the wrong price or forgetting to set stop-loss orders. There are people who end up buying it at the wrong price and selling it again at the wrong price.
This is usually done by people who regularly pump and dump in the market. Swing traders may use leverage to increase their potential profits, but this also increases their potential losses. High leverage can amplify market and volatility risks, and traders need to be aware of the risks involved and use proper risk management techniques. There are also instances that would turn out very well but the risk is the most common thing here.
In summary, swing trading involves several risks, and traders need to be aware of them and have a solid risk management plan in place to minimize their potential losses. Successful swing traders are those who can identify opportunities and manage their risks effectively. I personally would be ready for both outcomes and that's what gives me confidence while doing swing trades. I have had both successful swing trades and very bad swing trades as well. Understanding the risk is very important here.
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