What is RSI?

RSI is a technical indicator used by traders to monitor price movements, identify momentum and gauge when an asset is overbought or oversold. It can be used in various markets and is highly popular with Forex traders as well as being regularly used by those trading in stocks, options and futures. Like most market indicators, RSI is best when used alongside other indicators, techniques and strategies, and certainly shouldn’t be relied upon in isolation. However, it does have some strong advantages and is considered by some traders to be the single best indicator for certain types of trades.

It is popular with swing traders, who often use it alongside other tools such as a moving average or a point and figure chart. It is also used by momentum traders who tend to draw data from a few different sources and will often use RSI alongside an Average Directional Index and Rate of Change tools. RSI was originally developed by Welles Wilder in the 1970s, so the system has been in operation for a long time and has been well tested. More recently, research has shown ways that Wilder’s original concept can be expanded and improved upon. That is where the Connors RSI comes in.

Ratgeberbilder Artikel Mensch mit-fragendem Gesichtsausdruck

How is Connors RSI Different?

The original 2-period RSI has been widely used for years by thousands of traders. The Connors RSI has been developed as a result of tests done by Connors Research, who focus on assessing the effectiveness of different technical indicators and their ability to accurately predict future price movements. The newer system builds on the original and is a composite indicator made up of three components. Two of them are based on the RSI calculations developed by Welles Wilder. The third component is designed to rank the most recent price change using a scale from 0 to 100. Both systems are momentum oscillators, and both use the same scale. Either system, then, will present you with a value that shows as a number between 0 and 100.

Lower values indicate that a market is oversold, and higher values indicate that a market is overbought. The third component of the Connors RSI, however, is generally believed to enhance results and accuracy. This basically means that when the Connors RSI shows a particular value, it is more likely to predict a large price change than the original RSI system, RSI(2). As always, you will need to combine this tool with other market indicators and your own market knowledge, but it is certainly something that can be incorporated into your trading strategies.

Top 3 CFD Broker Comparison

1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

What Are the Three Components and How Do They Work?

As already mentioned, the Connors RSI is different from earlier versions, as it consists of three distinct components carrying out three different functions and a fourth calculation to generate a final value:

  • The RSI itself
  • The up/down length (or ‘streak’ duration value)
  • The rate of change
  • The average of the three components

The first of the three components is the original relative strength index devised by Welles Wilder, often referred to as Wilder’s RSI. The second component is the up/down length, sometimes referred to as the ‘streak’, based on the relationship between price values at closing on successive days. If a stock closes at a higher price than the day before for 4 consecutive days, we have a streak duration value of 4. If it closes at a lower price than the day before for 4 consecutive days, we have a streak duration value of -4. A stock levelling out and closing at the same price 2 days running will reset the streak duration value to 0. The third component of the Connors RSI ranks the rate of change using the most recent price change and calculates it as a percentile. This indicates the percentage of values in the lookback period (which the trader can define) that are below current value. The final calculation determines the average value of these three components to give us our final value.

Tips for Using Connors RSI

As with any technical indicator, you will have to decide for yourself exactly what your buy and sell signals are. These tools are not there to simplify trading. Rather, their aim is to make trading more profitable by actually giving you more complex forms of market analysis to work with. That is why becoming well-versed in technical analysis gives you the edge as a trader. This indicator is no exception, and there are a few things to be aware of. Generally speaking, a value of over 70 tends to indicate that a security is in danger of being overbought, while a value of below 30 is thought to indicate that a security is becoming oversold.

These are commonly seen as buy and sell signals by many traders. However, sudden and extreme price movements can make reading the data more difficult and create false buy and sell signals. For this reason, some traders have always chosen to use more extreme RSI values (above 80 or below 20) as buy and sell signals. This is an area where the Connors RSI may well have the edge. Extreme values on the Connors RSI seem to be more likely to predict a large price more than similar values on the original system.

Connors RSI– All the Information You Need in [yyyy]

Connors RSI– All the Information You Need in 2018

General

RSI, or Relative Strength Index, is a technical indicator used by traders to monitor markets and make wiser investment decisions. RSI works by comparing recent gains and losses in a market in order [...]

Momentum Trading Guide – Information You Need in [yyyy]

Momentum Trading Guide – Information You Need in 2018

General

Momentum traders are similar to trend traders in that they monitor movement in market prices and look for upward or downward trends they can take advantage of. They take either a long or short posi [...]

RSI and Divergence

Most traders use Connors RSI to ascertain when positions are overbought or oversold, as it does tend to be a good indicator in these areas. However, it is important to remember that there are points of divergence embedded in any RSI tool. Divergence is basically when there is disagreement between the price and the indicator, and it is considered an important piece of data to watch by many traders. Divergence happens when a security hits a new high or low in price but the RSI does not.

If a price makes a new high but the RSI does not, that is a sign of bearish divergence and is often a sell signal to experienced traders. If a price makes a new low but the RSI does not reach a corresponding low value, that is a sign of bullish divergence and is often seen as a buy signal. It is not uncommon to see RSI divergence at the top of a bullish market, and when that happens, sharp traders will be immediately on the alert for a reversal. Divergence is a useful warning of a possible reversal, although it should be noted that it is most useful in actively trending markets. It cannot be relied upon when markets are ranging and price swings are regular and limited.

Ratgeberbilder Artikel Boerse

Using the Connors RSI in Forex Trading

While traders of all types use Connors RSI to identify overbought or oversold conditions, it is also possible to devise a Forex trading strategy using RSI to predict when a market is overextended and likely to retrace. Forex traders will monitor the Connors RSI value alongside other market indicators with a set strategy in mind. They will tend to:

  • Monitor RSI to ascertain when a currency is overbought or oversold
  • Consult other technical indicators for signs that confirm a retracement is imminent
  • Check to see if a moving average convergence divergence (MACD) has shown divergence
  • Check to see if the average directional index (ADX) indicates a possible retracement

If all the above conditions are met, many Forex traders will determine it is probably a good time to initiate a trade. If you intend to use Forex trading as one of your strategies, do your own detailed broker comparison and consider going with a specialist Forex broker. It is also worth doing some in-depth research into Forex trading strategies, even if you are already trading with some success in other markets. When using RSI in Forex broking, just as with other markets, remember that sudden, extreme price movements, which are not uncommon in Forex markets, can create false buy or sell signals. Even though this is less likely with Connors RSI due to the extra components designed to improve accuracy, it is always advisable to consult other market indicators to confirm retracement.

1
of 21 Forex Broker Cityindex
Currency pairs 84 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit € 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 21 Forex Broker Pepperstone
Currency pairs 70 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 21 Forex Broker Markets.com
Currency pairs 50 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 21 Forex Broker AvaTrade
Currency pairs 47 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 21 Forex Broker Plus500
Currency pairs 61 Currencies
Max. Lever 1:30
Trading size Depends on underlying
Minimum deposit $ 100
Go to Broker
CFD Service. 80.6% lose money
1
of 6 ETF Broker Charles Stanley Direct
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 50
Trading from 11,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 ETF Broker Fidelity
ETFs w/ discount 93
Custody fee 0 GBP
Min. deposit £ 2.500
Trading from 25 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 ETF Broker AJ Bell Youinvest
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 0.00
Trading from 1,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 ETF Broker Bestinvest
ETFs w/ discount 216
Custody fee 0.4% annually
Min. deposit £ 500
Trading from 0 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 ETF Broker DEGIRO
ETFs w/ discount 740
Custody fee 0 GBP
Min. deposit £ 0
Trading from 1,75 GBP + 0,004%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 10 Stock Broker Charles Stanley Direct
National fees £ 11,50
Custody fee 0,25%
Intl. fees £ 11,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 10 Stock Broker Fidelity
National fees £ 10,00
Custody fee 0,35%
Intl. fees £ 10,00
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker Bestinvest Brokerage
National fees £ 7,50
Custody fee 0,4%
Intl. fees £ 7,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 10 Stock Broker DEGIRO
National fees £ 1,75 + 0,004%
Custody fee £ 0,00
Intl. fees 0,50 € + 0,004%
Dep. Protection 20,000 €
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 20 CFD Broker Plus500
FTSE spread Variable
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit $/€/£ 100
Go to Broker
CFD Service. 80.6% lose money
5
of 20 CFD Broker City Index
FTSE spread 1.0 Point
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 Crypto Broker IG
Crypto currencies 6
Max. Lever 1:2
Min. deposit £ 250
BTC spread 65 points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 Crypto Broker IQ Option
Crypto currencies 13
Max. Lever 1:1
Min. deposit $ 100
BTC spread 6 percent
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 Crypto Broker CC Trader Crypto
Crypto currencies 5
Max. Lever 1:1
Min. deposit € 0
BTC spread 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 Crypto Broker City Index
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 0
BTC spread 40
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 Crypto Broker Markets.com
Crypto currencies 5
Max. Lever 1:2
Min. deposit $ 100
BTC spread 140 Points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 Social Trading Broker ZuluTrade
Underlying assets 0
Dep. Protection 0
Min. deposit € 0
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 Social Trading Broker eToro
Underlying assets 866
Dep. Protection 50000
Min. deposit $ 200
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 Social Trading Broker Ayondo
Underlying assets 90
Dep. Protection 1000000
Min. deposit £ 2000
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 Social Trading Broker Tradeo
Underlying assets 122
Dep. Protection 20000
Min. deposit £ 250
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 Social Trading Broker FXTM
Underlying assets 247
Dep. Protection 20000
Min. deposit £ 5
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Spread Betting Broker City Index
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:20
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker Core Spreads
FTSE spread 0.8 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 10
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Spread Betting Broker GKFX
FTSE spread 0.9 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 20
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

Which Other Technical Indicators Should You Use with Connors RSI?

Smart traders in all markets will devise a multi-indicator strategy, often combining volatility indicators, momentum indicators and volume indicators. While it is advisable to confirm market activity using multiple sets of data, it is not always a case of more is better. Monitoring too many indicators at once not only over-complicates your strategy but also may lead to redundancy if you have several indicators that are basically doing the same job. You may want to combine your Connors RSI indicator with:

  • A volume indicator
  • A moving average indicator
  • Average directional index (ADX)
  • Any other indicator you already use and are comfortable with

Any RSI indicator is a momentum indicator, so it makes sense to confirm the data it presents with other momentum indicators, such as ADX, which is considered by many to be the ultimate trend indicator. Combining data from an RSI indicator with data from a moving average indicator, such as MACD or Bollinger Bands, is also useful to watch for trends and reversals. A volume indicator, such as on-balance volume (OBV), can also be useful, as it combines price and volume to calculate the total funds going in and out of a market. Lastly, be aware that because each indicator takes time to master, you should take a look at any indicator you already use and are comfortable with to see if it has functions that can be used alongside any new indicator you add to your strategy.

Conclusion:

Connors RSI: Our Verdict

RSI is a useful indicator for traders in all markets, and there is little doubt that the analysis that came out of Connors Research and resulted in the development of the new Connors RSI has moved the game forward. Incorporating the three different components and calculating an average that uses three sets of data does seem to have improved accuracy overall. One of the drawbacks of using RSI indicators has always been the fact that sudden sharp price movements could trigger false signals. While Connors RSI has not completely eliminated this issue, the new system does seem to produce a more reliable data set at the two extremes, making false signals less of a problem. It is advisable to combine Connors RSI with other indicators, but that is the case with any trading tool or software.

A more complex, multi-indicator strategy tends to provide more reliable data and better long-term results, as long as it is carefully devised to use complementary indicators and avoid too much redundancy. Connors RSI is versatile and can be used in most markets. It can be used to develop a Forex trading strategy and is a solid indicator for those trading stocks, options and futures. Overall, Connors RSI is a highly useful indicator. Our advice would be to familiarise yourself thoroughly with the functions and limitations of RSI analysis, be aware of divergence issues and possible false signals and combine Connors RSI with other relevant and complementary indicators.

CFD Highlights

What is Momentum Trading?

At first glance, momentum trading looks very similar to many other types of trading, but there are subtle differences. Momentum traders, unlike many other investors, pay very little attention to the true value of a stock, and, while some momentum traders may monitor company fundamentals, that is certainly not a necessary part of this strategy. At its simplest, momentum effect states that when prices have steadily increased, or decreased, in the recent past, they will continue to do so in the near future. That does not, of course, sound very scientific, yet this effect has been confirmed in academic studies over the last 20 years and is surprisingly reliable. It works across all international stock markets and applies to emerging markets too.

A market-wide reversal in momentum happens so rarely that it tends to make national news. This happened in 2009, when markets ‘crashed’ and financials went into the lead in markets across the world, having previously been the weakest contender. An article in the Financial Times asserts that the last momentum reversal on a similar scale was the 1932 worldwide market crash which, along with the original crash of 1929, helped trigger the Great Depression. Momentum then, tends to be something that can be relied upon, independent of other market factors, though it is difficult to explain why. For this reason, this type of trading remains a popular strategy, used in a variety of ways by different types of traders.

forex 1

Identifying Momentum

While momentum itself is reliable, identifying it can be tricky. Not all upwards or downwards trends in the markets indicate momentum. Many markets tend to range over the long-term, with frequent, predictable upturns followed by equally likely downturns. Traders typically draw data from a number of sources to ascertain whether a stock has momentum. They will consider various data sources, such as:

  • Average Directional Index (ADX)
  • Rate of Change (RoC)
  • Relative Strength Index
  • Specific events

By monitoring data from these sources, experienced investors put together a clear picture of exactly what is happening across various markets. An ADX of over 25 tends to indicate momentum, as anything less than that suggests that there will be strong pullbacks in the market. The RoC measures the percentage change in stock prices over a set number of trading periods, generating a trendline that fluctuates across a zero line. Trends above and below the zero line indicate an increase or decrease in momentum. The RSI compares recent gains and losses and can be used to assess whether a stock is overbought or oversold. While all these tools can be useful, none of them offer any guarantee and any one, used in isolation, should not be relied upon as a strong indicator. Traders tend to use a combination of these tools to monitor markets. Lastly, specific events within a company or industry can cause sudden and steep momentum over a very short period of time, which is always interesting.

Top 3 CFD Broker Comparison

1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

Different Types of Momentum Trading

Most momentum traders will fall into other sub-groups. A technical-based momentum trader will be inclined to base buying and selling decisions on technical analysis that they will use to determine whether the market is higher or lower than expected. This type of trader will use tools like moving averages and charting software to monitor price movements and trends. They have a certain amount in common with swing traders in this respect, but are looking for strong, one-way, short-term trends that they predict will continue in the same direction, rather than tightly bound, ranging, markets.

Event-based momentum traders have more in common with fundamental traders, basing decisions on company-specific events and industry news that is likely to impact share prices in a given market. However, they are generally looking at much shorter time frames than a typical fundamental investor. Most momentum traders are day traders, who aim to close out their positions before the end of the day, but a specific event can still impact prices in the space of a day, often creating a quick surge in momentum over several hours, allowing traders to make a series of quick trades. In addition, there are plenty of traders who cross all the lines, trading in different ways, employing a mix of typical day trading strategies, swing trading, fundamentals-based trading and momentum trading.

Popular Strategies Used by Momentum Traders

Momentum traders focus on stocks that show a continuing trend in one direction, typically with high trade volume and over a specified, and very short, time period. This strategy can be more complicated than it seems, and traders often spend a lot of time watching and analysing the data around markets they are interested in. Successful traders pay attention to things like:

  • Daily watch lists
  • Volume
  • Resistance levels
  • Technical indicators

Like many other trading strategies, this strategy often involves following a daily watch list, typically via a brokerage app, and many traders follow trade volumes closely, as high trade volumes are a significant signal in this type of investing. If there are more buyers than sellers of a popular stock this is likely to raise prices and trigger momentum. Momentum traders are also interested in stocks that are pushing past their resistance levels, which is why monitoring technical indicators is important. Traders use technical indicators in different ways. Whereas swing traders may be looking to buy or sell when prices hit a resistance point, momentum traders look for stocks that have already passed a resistance point and are continuing up or down. They will then sell or short that stock when they have reached a certain profit point.

Connors RSI– All the Information You Need in [yyyy]

Connors RSI– All the Information You Need in 2018

General

RSI, or Relative Strength Index, is a technical indicator used by traders to monitor markets and make wiser investment decisions. RSI works by comparing recent gains and losses in a market in order [...]

Momentum Trading Guide – Information You Need in [yyyy]

Momentum Trading Guide – Information You Need in 2018

General

Momentum traders are similar to trend traders in that they monitor movement in market prices and look for upward or downward trends they can take advantage of. They take either a long or short posi [...]

How to be Successful with Momentum Trading

Momentum trading can be profitable, but it is not easy to get right consistently. Many successful momentum traders tend to be more experienced traders, well-versed in technical analysis, and adept at handling risk. They will pick their investments carefully, carrying out detailed research into the tools and data they need to monitor markets accurately. They are prepared to make a considerable time investment to learn the skills they need to carry out in-depth technical analysis, identify momentum quickly, and make profitable decisions.

As we have mentioned, no one indicator or strategy can be trusted in isolation, so it is often necessary to quickly aggregate data from several different sources to get a clear picture of what is happening in a market. Add to this the fact that you may be juggling many open trades at any one time, and it is not surprising that momentum traders are often skilled and experienced investors, with a talent for multi-tasking. This type of trading requires sustained high levels of focus and attention, fast thinking, and a clear head. Successful traders tend to be highly disciplined, with nerves of steel, and able to hold steadfast when momentum is going in the right direction, but their target has not yet been reached. Momentum trading can be fast-paced and stressful, so it is generally considered a strategy for the brave.

stocks 2

What are the Risks Associated with Momentum Trading?

It is always advisable to assess the risk involved in a particular type of investment. All trading carries some element of risk, but there are plenty of trading strategies that are less risky than momentum trading. Experienced traders use this strategy because there is a possibility of high returns, and high returns are almost always associated with higher risk. Traders need to consider:

  • Risk/return trade-off
  • Potentially high fees
  • Time commitment
  • Market sensitivity

There is inevitably a trade-off when looking at risk and return. It is always possible to misread momentum and make a bad trade. Add to that the fast pace that momentum traders work at, and human error can lead to sudden losses on any given day. A good day, however, will often result in a very healthy return on investment. High fees are always a problem when completing a lot of trades over a short time period. There are many low-cost brokers that can help balance this problem out, so just remember to factor the cost per trade into your broker comparison research. It is important to be monitoring the market on an hourly basis with this type of trading, so the daily time commitment is considerable. Lastly this type of trading is sensitive to market conditions. It works best in a bull market and is tricky to pull off profitably in a bear market.

1
of 21 Forex Broker Cityindex
Currency pairs 84 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit € 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 21 Forex Broker Pepperstone
Currency pairs 70 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 21 Forex Broker Markets.com
Currency pairs 50 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 21 Forex Broker AvaTrade
Currency pairs 47 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 21 Forex Broker Plus500
Currency pairs 61 Currencies
Max. Lever 1:30
Trading size Depends on underlying
Minimum deposit $ 100
Go to Broker
CFD Service. 80.6% lose money
1
of 6 ETF Broker Charles Stanley Direct
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 50
Trading from 11,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 ETF Broker Fidelity
ETFs w/ discount 93
Custody fee 0 GBP
Min. deposit £ 2.500
Trading from 25 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 ETF Broker AJ Bell Youinvest
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 0.00
Trading from 1,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 ETF Broker Bestinvest
ETFs w/ discount 216
Custody fee 0.4% annually
Min. deposit £ 500
Trading from 0 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 ETF Broker DEGIRO
ETFs w/ discount 740
Custody fee 0 GBP
Min. deposit £ 0
Trading from 1,75 GBP + 0,004%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 10 Stock Broker Charles Stanley Direct
National fees £ 11,50
Custody fee 0,25%
Intl. fees £ 11,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 10 Stock Broker Fidelity
National fees £ 10,00
Custody fee 0,35%
Intl. fees £ 10,00
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker Bestinvest Brokerage
National fees £ 7,50
Custody fee 0,4%
Intl. fees £ 7,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 10 Stock Broker DEGIRO
National fees £ 1,75 + 0,004%
Custody fee £ 0,00
Intl. fees 0,50 € + 0,004%
Dep. Protection 20,000 €
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 20 CFD Broker Plus500
FTSE spread Variable
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit $/€/£ 100
Go to Broker
CFD Service. 80.6% lose money
5
of 20 CFD Broker City Index
FTSE spread 1.0 Point
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 Crypto Broker IG
Crypto currencies 6
Max. Lever 1:2
Min. deposit £ 250
BTC spread 65 points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 Crypto Broker IQ Option
Crypto currencies 13
Max. Lever 1:1
Min. deposit $ 100
BTC spread 6 percent
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 Crypto Broker CC Trader Crypto
Crypto currencies 5
Max. Lever 1:1
Min. deposit € 0
BTC spread 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 Crypto Broker City Index
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 0
BTC spread 40
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 Crypto Broker Markets.com
Crypto currencies 5
Max. Lever 1:2
Min. deposit $ 100
BTC spread 140 Points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 Social Trading Broker ZuluTrade
Underlying assets 0
Dep. Protection 0
Min. deposit € 0
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 Social Trading Broker eToro
Underlying assets 866
Dep. Protection 50000
Min. deposit $ 200
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 Social Trading Broker Ayondo
Underlying assets 90
Dep. Protection 1000000
Min. deposit £ 2000
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 Social Trading Broker Tradeo
Underlying assets 122
Dep. Protection 20000
Min. deposit £ 250
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 Social Trading Broker FXTM
Underlying assets 247
Dep. Protection 20000
Min. deposit £ 5
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Spread Betting Broker City Index
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:20
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker Core Spreads
FTSE spread 0.8 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 10
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Spread Betting Broker GKFX
FTSE spread 0.9 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 20
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

What are the Benefits Associated with Momentum Trading?

While there are considerable risks to be aware of with this type of trading, there are also significant benefits for traders who get it right.

  • Long-term success rates
  • High profit potential
  • The opportunity to leverage market volatility
  • The opportunity to leverage investor emotion

If you have been paying attention, you will know by now that the idea behind momentum trading is a simple one that, on the surface, seems unscientific and even counter-intuitive. Savvy business owners and consumers know that you do not usually benefit from simply doing what everyone else is doing or buying what others have recently bought. However, the evidence shows that this strategy, implemented correctly, works. One of the strongest predictors of future price movement, on the stock market, seems to be past price movement, just as with individuals, one of the strongest predictors of future behaviour is often past behaviour. When developed into a strategy that factors in other market indicators, this becomes a potentially high-profit way of investing. Successful traders can leverage the market’s volatility to their own advantage, riding the wave of momentum and being disciplined enough to take their profit at a pre-determined level. These traders are also cleverly leveraging the emotional decisions of other investors. Ultimately, momentum relies more on emotion than any rational or technical aspect of investing. Smart traders can use a rational system, with a specific buy and sell point, to profit from the emotional investing decisions of others.

Conclusion:

Momentum Trading: Our Verdict

We have established that momentum trading works, and that it can lead to a high return on investment for successful traders. Momentum traders aim to profit from short-term, high-volume stock movements, waiting for prices to break through resistance points and acting quickly when they do. However, this is not a practical strategy for every investor. It is worth considering if you are a more experienced trader with time to devote to the strategy, and a strong, integrated system for using technical indicators to identify and monitor momentum.

You will also need a great deal of discipline, and a cool head. The theory behind why momentum happens is that investors make emotional decisions, but this is not how successful momentum traders make their, often substantial, profits. This type of trading relies on you keeping to your set objectives, entering and exiting positions strategically and making rational decisions while many other investors are making decisions following their emotions. There are various risks attached to trading in this way, and it is not for the inexperienced or overly cautious, but there are certainly healthy returns to be made by those willing to put in the time and effort to learn the right techniques and develop well-thought out strategies.

CFD Highlights

What Exactly is Swing Trading?

Swing trading is often compared to fundamental trading, which is a trading strategy in which investors monitor and analyse company-specific events in order to decide when to buy a specific stock, how long to hold it and when to sell it. If you are trading in fundamentals, you are usually swing trading, since any company-specific events will tend to affect stock prices over a few days or even a week or so, rather than on an hour-to-hour basis. There is a little more to swing trading than that, however. Most swing traders use a combination of different technical indicators to decide which markets to invest in and how long to hold their stock.

The trading behaviour of a typical swing trader generally sits somewhere between that of a day trader and that of a trend trader. Day traders may hold stock anywhere from a few seconds to several hours, but all their trades will be completed within a day. A trend trader focuses on long-term fundamental trends and may hold stock for weeks or even months. A swing trader will tend to hold stock for anywhere from a few days to two or even three weeks. Swing traders are aiming to make a fairly quick profit, but they are looking at price changes over a slightly longer period of time than day traders and are trying to predict longer-term price movements, usually using a combination of a few different market indicators.

stocks 2

What Technical Indicators Do Swing Traders use?

If you are interested in this strategy, you will want to learn about the technical indicators traders use to try and predict price changes. This involves a lot of examining charts and tracking price movements, but there are various apps and software that can help you. You may want to consider:

  • A moving average
  • A relative strength index (RSI)
  • A point & figure (P&F) chart
  • A Fibonacci retracement chart

Many swing traders use either a simple moving average or an exponential moving average to identify or confirm a market trend. There are various charting apps that incorporate a moving average. A commonly used system based on an exponential moving average is the Bollinger Bands system. You can also use an RSI indicator. Many traders consider this the best technical indicator for swing trading, giving you a strong indication of when conditions are optimal for entry into a market. You can use your RSI indicator alongside a system that incorporates a moving average. Other indicator options include a P&F chart, which presents periods of rising and falling prices as a grid view, and a Fibonacci retracement chart. Technical indicators only become stronger (in terms of accurate predictions) when used with other indicators. It makes sense to learn your way around one technical indicator at a time, but when devising your own trading strategies, be aware that the more indicators you are monitoring, the more accurate your market predictions are likely to be.

Top 3 CFD Broker Comparison

1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

When to Use Swing Trading

Swing trading is a strategy that can be used in different markets and on any trading platform by traders of all levels. Before you start, you’ll have to decide which broker to use, and your broker comparison research should look closely at trading fees and commissions. You’ll be buying and selling regularly, so your cost per trade is an important figure. You can use this strategy when trading stocks, futures, options and Forex. While you can deal in any kind of stocks as a swing trader, you will find that there is often an advantage in trading large-cap stocks, simply because they are the most actively traded on all major stock exchanges.

As a swing trader, you will benefit when markets are fairly quiet and ranging, as you will be able to make a lot of small short-term gains. A sudden upwards trend will afford you an opportunity to make a bigger profit if you buy at the right price point. An extreme bear market or bull market, however, makes things challenging for swing traders. In these markets, momentum will tend to take prices in only one direction for a relatively long period of time. You will not see the same small fluctuations in stock price that you see when the market is stable for a long period of time, and it is those continuous fluctuations that allow swing traders to make small but regular profitable trades.

Strategies Used in Swing Trading

This method is, of course, a strategy in itself, but you will also have to develop your own specific trading strategies based on the technical indicators you want to use, the stop-loss limits you want to set and other variables important to you. Take time to consider all these factors and get everything in place before you start trading. In a ranging market, you will probably want to go with a very straightforward “buy low, sell high” strategy, but it is also possible to swing trade in a trending market. Even in an uptrend, for example, there will often be a step-like or zig-zag pattern as a stock pulls back slightly before continuing an uptrend.

Bullish swing traders will use a stock rising out of a ‘step’ to try and take a profit before the next small pullback. For most swing traders though, a ranging market is an ideal one to work in. Many swing traders will start with a very simple strategy, often using a tool such as Bollinger Bands, which use that exponential moving average we referred to earlier to create a ‘support and resistance’ system. Once you can accurately use this system to find a ranging market and identify the best times to buy and sell, you have one of the most straightforward strategies used by swing traders at your disposal, and you can begin to experiment.

Connors RSI– All the Information You Need in [yyyy]

Connors RSI– All the Information You Need in 2018

General

RSI, or Relative Strength Index, is a technical indicator used by traders to monitor markets and make wiser investment decisions. RSI works by comparing recent gains and losses in a market in order [...]

Momentum Trading Guide – Information You Need in [yyyy]

Momentum Trading Guide – Information You Need in 2018

General

Momentum traders are similar to trend traders in that they monitor movement in market prices and look for upward or downward trends they can take advantage of. They take either a long or short posi [...]

Swing Trading Versus Day Trading

There are similarities between day traders and swing traders. Both are trying to predict market changes and make small, short-term profits on a regular basis. The different time frames they work in are significant, though.

  • Day traders never hold a stock overnight
  • Day traders, therefore, don’t risk a stock opening at a very different price point than it closed at the night before
  • Swing traders are more vulnerable to market-impacting events that happen overnight
  • Day trading carries risks associated with the shorter time frame as well

While it may seem safer to open and close a trade in the same working day, day trading is not without risks. Fees and commissions can add up quickly when trading that often. A few bad trades in a day will have a big impact on profit – a day of bad trades can wipe out your portfolio. Swing trading also carries its fair share of risk, but trading is more spread out, and there may be days with few, if any, transactions to pay commission on. Day trading can also be a very high-pressure strategy, given the intense focus and fast thinking needed to manage many different positions at the same time. Swing traders have a little more time to monitor markets and consider trades.

forex 1

The Benefits of Swing Trading

There are pros and cons to any kind of trading, and it’s important to consider them before diving into any new platform or strategy. Some of the advantages of this type of trading include:

  • You can take advantage of market fluctuations
  • You can create clear boundaries
  • Easier to spot new opportunities
  • Less stressful

Markets are always moving, and swing traders take advantage of those rises and dips. You can use your chosen technical indicators to set clear boundaries for all your trades. You can decide in advance how much profit you want to take or which metric you will use to decide a trade is working against you and limit losses. By completing trades over short periods of time, you spread your risk and tie up less capital at any one time than you would if holding stock long-term. By being constantly in and out of the markets quickly, you can learn to look ahead and spot the next trending opportunity. As we have already mentioned, swing trading can be less stressful and require less intense focus than fast-paced day trading, but it is also sometimes less stressful than trend trading. Stop losses are typically smaller on short-term trades. Most swing traders will cut their losses early and move on to a new market.

1
of 21 Forex Broker Cityindex
Currency pairs 84 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit € 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 21 Forex Broker Pepperstone
Currency pairs 70 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 21 Forex Broker Markets.com
Currency pairs 50 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 21 Forex Broker AvaTrade
Currency pairs 47 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 21 Forex Broker Plus500
Currency pairs 61 Currencies
Max. Lever 1:30
Trading size Depends on underlying
Minimum deposit $ 100
Go to Broker
CFD Service. 80.6% lose money
1
of 6 ETF Broker Charles Stanley Direct
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 50
Trading from 11,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 ETF Broker Fidelity
ETFs w/ discount 93
Custody fee 0 GBP
Min. deposit £ 2.500
Trading from 25 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 ETF Broker AJ Bell Youinvest
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 0.00
Trading from 1,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 ETF Broker Bestinvest
ETFs w/ discount 216
Custody fee 0.4% annually
Min. deposit £ 500
Trading from 0 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 ETF Broker DEGIRO
ETFs w/ discount 740
Custody fee 0 GBP
Min. deposit £ 0
Trading from 1,75 GBP + 0,004%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 10 Stock Broker Charles Stanley Direct
National fees £ 11,50
Custody fee 0,25%
Intl. fees £ 11,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 10 Stock Broker Fidelity
National fees £ 10,00
Custody fee 0,35%
Intl. fees £ 10,00
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker Bestinvest Brokerage
National fees £ 7,50
Custody fee 0,4%
Intl. fees £ 7,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 10 Stock Broker DEGIRO
National fees £ 1,75 + 0,004%
Custody fee £ 0,00
Intl. fees 0,50 € + 0,004%
Dep. Protection 20,000 €
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 20 CFD Broker Plus500
FTSE spread Variable
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit $/€/£ 100
Go to Broker
CFD Service. 80.6% lose money
5
of 20 CFD Broker City Index
FTSE spread 1.0 Point
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 Crypto Broker IG
Crypto currencies 6
Max. Lever 1:2
Min. deposit £ 250
BTC spread 65 points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 Crypto Broker IQ Option
Crypto currencies 13
Max. Lever 1:1
Min. deposit $ 100
BTC spread 6 percent
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 Crypto Broker CC Trader Crypto
Crypto currencies 5
Max. Lever 1:1
Min. deposit € 0
BTC spread 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 Crypto Broker City Index
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 0
BTC spread 40
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 Crypto Broker Markets.com
Crypto currencies 5
Max. Lever 1:2
Min. deposit $ 100
BTC spread 140 Points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 Social Trading Broker ZuluTrade
Underlying assets 0
Dep. Protection 0
Min. deposit € 0
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 Social Trading Broker eToro
Underlying assets 866
Dep. Protection 50000
Min. deposit $ 200
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 Social Trading Broker Ayondo
Underlying assets 90
Dep. Protection 1000000
Min. deposit £ 2000
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 Social Trading Broker Tradeo
Underlying assets 122
Dep. Protection 20000
Min. deposit £ 250
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 Social Trading Broker FXTM
Underlying assets 247
Dep. Protection 20000
Min. deposit £ 5
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Spread Betting Broker City Index
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:20
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker Core Spreads
FTSE spread 0.8 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 10
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Spread Betting Broker GKFX
FTSE spread 0.9 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 20
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

What Are the Risks of Swing Trading?

There are certainly a few risks to consider. Swing traders focus on short-term trends, making them potentially vulnerable to unexpected market shocks that could send prices sharply in one direction. While less intense than day trading, swing trading is still quite pressured and time consuming. Holding stocks overnight makes swing traders more vulnerable than day traders when it comes to market-impacting events that may become breaking news overnight. Short-term trading generally involves smaller profits than longer-term strategies, and commissions on regular trades eat into those profits. In order to swing trade successfully, you have to be able to read and analyse various technical indicators and use them together to make sense of market trends.

This takes time to learn and means human error is always possible. One of the strongest predictors of how successful you will be as a swing trader is your ability to manage risk. To limit risk, you will need to diversify your portfolio and have a well-thought-out strategy regarding stop loss limits. You will need to set stop loss limits for each individual stock and work out how these will impact your portfolio as a whole. Successful swing traders tend to be those who are well versed in technical analysis and have learned to manage risk strategically.

Conclusion:

Swing Trading: Our Verdict

Swing trading has its pros and cons, but ultimately it is a form of trading that most traders can benefit from trying. It does require an initial time commitment to learn about technical analysis, but well-developed charting software and user-friendly apps make it possible for even less-experienced traders to get a feel for it quite quickly. Swing traders receive feedback on their trades within a short time period, which can also accelerate the learning curve for newer traders. Swing traders can make regular small profits, and as their experience increases, they may well be able to scale up to larger profits.

There are certainly risks involved, as with any trading method, so it’s important to have good risk management strategies in place. This method, however, does allow traders to create clear boundaries around their trades and avoid some of the bigger losses that other traders face, as stop losses are generally smaller on short-term trades than for trend traders. Swing trading will not suit everyone, but for many traders, it provides a comfortable ‘happy medium’ between the frantic pace of day trading and the patience and long-term commitment needed for trend trading.

CFD Highlights

Background – How do Bollinger Bands Work?

In the 1980s, market technician John Bollinger developed a technique of using a moving average with two trading ‘bands’ inserted either side of this average. Without getting too technical, the system works by using a standard deviation formula, which can be used to measure the volatility of any given asset. This shows how far the stock price is moving away, in either direction, from its true value. In fact, traders can find most of the price data they need between these two bands, and use this data to make quicker buying and selling decisions. If a stock price is consistently touching the upper band, prices are overbought.

If it’s resting on the bottom band for too long, prices are generally considered oversold. In an uptrend, you would expect prices to stay in the area between the moving average and the upper band. A dip below the moving average would generally indicate a trend reversal. In his own book, Bollinger on Bollinger Bands, John Bollinger makes it clear that this system is meant to introduce the idea of relativity to trading, giving investors a relative framework that helps them avoid the common pitfalls of the usual common sense ‘buy low, sell high’ attitude to trading. You can set up the bands in many trading apps, including the ever-popular MetaTrader 4.

Ratgeberbilder Artikel Aktien

What do Bollinger Bands Indicate?

The three bands you will see when monitoring any given market indicate two price bands, above and below an exponential moving average. The price bands show the standard deviations of that particular stock. Tight bands indicate that the market is quiet and stable, with little movement on prices. Wider, ‘spread out’ bands indicate more market volatility. The bands expand as the price action becomes volatile, and contract as the market calms down and becomes bound into a tighter trading pattern. This makes it easier for you to see trends over a given time period. Using the bands to guide your trading decisions can be complicated, because there are a few different strategies you can use, but there are some basic rules to keep in mind:

  • Bands that are close together indicate a quiet, stable period
  • Close bands mean the market is in a tight trading pattern
  • When bands move further apart, this indicates more price action
  • Spread out bands show there is increased market volatility

It is, of course, common for markets to trade erratically on any one day, even if they are still trading in a solid upwards or downwards trend. With Bollinger Bands, the middle band represents a 20-day moving average, so you will be able to track long-term trends, regardless of daily ‘blips’ in the market.

Top 3 CFD Broker Comparison

1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

 

The Bollinger Bounce and the Bollinger Squeeze

This system measures how far the stock is deviating from what is considered its true value, and you can generally expect the price of the stock to return to the middle of the bands. This means that when the price goes down and hits the bottom band, you will typically see a ‘bounce’ back up again. When the price approaches the top band, it will tend to ‘bounce’ off that too, going down and returning to the middle of the bands. Many traders develop strategies to capitalise on these bounces, especially when the market is ranging rather than trending. There is also a market pattern known as the Bollinger squeeze – this is when the bands squeeze together.

As we have already noted, tight bands indicate a quiet, less volatile market, but as most traders are aware, there is almost always a calm before a storm. A period of low volatility is usually a sign that a breakout in price is about to happen. If prices break out through the top band, it is very likely that the upward trend will continue. A break out below the bottom band indicates prices will probably continue to fall. The bands will then expand as the market enters a period of high volatility again. The Bollinger squeeze, then, is often followed by a trend in either direction. If the market is ranging, you will then start to see the Bollinger bounce again, as prices range between the top and bottom bands.

Strategies to use With Bollinger Bands

While we are striving to provide you with a comprehensive Bollinger Bands guide, it is impossible to cover every possible strategy that can be developed using this indicator. Your strategies will depend on a range of things, including how much risk you are comfortable with. There are a few different strategies commonly used by traders using this tool.

  • Trading within the bands
  • Riding the bands
  • Using the Bollinger squeeze
  • Capitalising on reversals

If you want to keep things fairly low risk, you may want to trade within the bands, but other strategies can also work well. Traders who are ‘riding the bands’ are those who are holding on to their stock as it goes up above the top band. A stock price hitting the top (or bottom) band is not, in itself, a sell (or buy) signal. Sometimes the price does trend well outside the bands, in either direction, and this can be the time to hang in there for a big profit, for those who are not too risk-averse. Some traders will also try and make predictions around the Bollinger squeeze. This strategy is based on the idea that when an indicator reaches the lowest level it has been at in the last six months, it is likely that volatility will suddenly increase. Remember the calm comes before the storm – a squeeze often precedes big movement in the market.

Connors RSI– All the Information You Need in [yyyy]

Connors RSI– All the Information You Need in 2018

General

RSI, or Relative Strength Index, is a technical indicator used by traders to monitor markets and make wiser investment decisions. RSI works by comparing recent gains and losses in a market in order [...]

Momentum Trading Guide – Information You Need in [yyyy]

Momentum Trading Guide – Information You Need in 2018

General

Momentum traders are similar to trend traders in that they monitor movement in market prices and look for upward or downward trends they can take advantage of. They take either a long or short posi [...]

What are the Best Ways to use Bollinger Bands?

There are a few different strategies you can employ, and there is no single universal best way to use Bollinger Bands, but there are some ways that are more desirable than others when you start, simply because they are not too high-risk. Though all trading carries some risk, trading within the bands is a relatively low-risk strategy many traders prefer. Trading within the bands is exactly what it sounds like – you find a stock that is consistently ranging between the upper and lower bands, then you buy when it touches the bottom band and sell when it touches the top band. Obviously, the greater the range, the more profit you will take on each trade. This may not be the way to make a big profit very quickly, but it is certainly a solid long-term strategy. Another lower-risk strategy with a ranging stock is to buy or sell in the middle of the bands when a firm upwards to downwards trend seems likely. Then you can sell at the top band (or buy at the bottom band). If you are feeling brave, you can always ride the bands for a while before selling or buying. Both these strategies appeal to traders who are fairly risk-averse and who are happy to make regular, modest gains rather than huge profits.

Ratgeberbilder Artikel Boerse

Reasons to be Wary of Using Bollinger Bands

There is no such thing as a miracle tool that makes traders immune to the all the risks and pitfalls involved in trading. While Bollinger Bands are helpful to many traders, and loved by some, the system has its limitations and drawbacks. The main issue with using any app, tool or system to help you trade is that some people may be lulled into a false sense of security, thinking that the system gives them some level of security or protection from risk. This tool is a great technical indicator, but you will still need to decide on and implement your own trading strategies.

The app can give you indicators of when to buy, sell or hold your stock, but the decisions are still yours and the outcome will be better on some trades than others. Remember, there are no guarantees when it comes to trading, and almost all investors will lose money at some point, as well as make it. While this tool is a great indicator of market volatility, it cannot actually indicate when the optimal time to buy or sell is. It can reveal patterns, predict when a trend is likely, and clearly show when a particular market is ranging, but only you can decide how to use this information to develop your own strategies.

1
of 21 Forex Broker Cityindex
Currency pairs 84 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit € 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 21 Forex Broker Pepperstone
Currency pairs 70 Currencies
Max. Lever 1:30
Trading size Mini-Lot
Minimum deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 21 Forex Broker Markets.com
Currency pairs 50 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 21 Forex Broker AvaTrade
Currency pairs 47 Currencies
Max. Lever 1:30
Trading size Micro-Lot
Minimum deposit $ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 21 Forex Broker Plus500
Currency pairs 61 Currencies
Max. Lever 1:30
Trading size Depends on underlying
Minimum deposit $ 100
Go to Broker
CFD Service. 80.6% lose money
1
of 6 ETF Broker Charles Stanley Direct
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 50
Trading from 11,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 ETF Broker Fidelity
ETFs w/ discount 93
Custody fee 0 GBP
Min. deposit £ 2.500
Trading from 25 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 ETF Broker AJ Bell Youinvest
ETFs w/ discount
Custody fee 0 GBP
Min. deposit £ 0.00
Trading from 1,50 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 ETF Broker Bestinvest
ETFs w/ discount 216
Custody fee 0.4% annually
Min. deposit £ 500
Trading from 0 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 ETF Broker DEGIRO
ETFs w/ discount 740
Custody fee 0 GBP
Min. deposit £ 0
Trading from 1,75 GBP + 0,004%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 10 Stock Broker Charles Stanley Direct
National fees £ 11,50
Custody fee 0,25%
Intl. fees £ 11,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 10 Stock Broker Fidelity
National fees £ 10,00
Custody fee 0,35%
Intl. fees £ 10,00
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 10 Stock Broker Bestinvest Brokerage
National fees £ 7,50
Custody fee 0,4%
Intl. fees £ 7,50
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 10 Stock Broker DEGIRO
National fees £ 1,75 + 0,004%
Custody fee £ 0,00
Intl. fees 0,50 € + 0,004%
Dep. Protection 20,000 €
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 10 Stock Broker IG Stock
National fees £ 8,00
Custody fee £ 8,00
Intl. fees 10 EUR
Dep. Protection 50,000 GBP
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 20 CFD Broker Markets.com
FTSE spread 1.5 Points
Dep. Protection € 20.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 20 CFD Broker AvaTrade
FTSE spread 1.5 Points
Dep. Protection € 50.000
Max. Lever 1:30
Min. deposit € 250
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 20 CFD Broker Pepperstone
FTSE spread 1 Point
Dep. Protection £ 50000
Max. Lever 1:30
Min. deposit $ 200
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 20 CFD Broker Plus500
FTSE spread Variable
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit $/€/£ 100
Go to Broker
CFD Service. 80.6% lose money
5
of 20 CFD Broker City Index
FTSE spread 1.0 Point
Dep. Protection £ 50.000
Max. Lever 1:30
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 Crypto Broker IG
Crypto currencies 6
Max. Lever 1:2
Min. deposit £ 250
BTC spread 65 points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 Crypto Broker IQ Option
Crypto currencies 13
Max. Lever 1:1
Min. deposit $ 100
BTC spread 6 percent
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 Crypto Broker CC Trader Crypto
Crypto currencies 5
Max. Lever 1:1
Min. deposit € 0
BTC spread 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 Crypto Broker City Index
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 0
BTC spread 40
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 Crypto Broker Markets.com
Crypto currencies 5
Max. Lever 1:2
Min. deposit $ 100
BTC spread 140 Points
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 6 Social Trading Broker ZuluTrade
Underlying assets 0
Dep. Protection 0
Min. deposit € 0
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 6 Social Trading Broker eToro
Underlying assets 866
Dep. Protection 50000
Min. deposit $ 200
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 6 Social Trading Broker Ayondo
Underlying assets 90
Dep. Protection 1000000
Min. deposit £ 2000
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 6 Social Trading Broker Tradeo
Underlying assets 122
Dep. Protection 20000
Min. deposit £ 250
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 6 Social Trading Broker FXTM
Underlying assets 247
Dep. Protection 20000
Min. deposit £ 5
Max. Lever 1:30
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 9 Spread Betting Broker City Index
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:20
Min. deposit £ 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 9 Spread Betting Broker IG
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 9 Spread Betting Broker Core Spreads
FTSE spread 0.8 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 10
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 9 Spread Betting Broker OANDA
FTSE spread 1 Point
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 9 Spread Betting Broker GKFX
FTSE spread 0.9 Points
Dep. Protection 50000
Max. Lever 1:30
Min. deposit £ 20
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

Tips for Trading with Bollinger Bands

If you are now convinced that adding Bollinger Bands to your trader’s toolbox is a good idea, there are just a few more things you might like to keep in mind moving forward.

  • Use the default settings
  • Experiment with caution
  • Use the bands with other market indicators
  • Continue to research and learn

Default settings put the middle band on a 20-period moving average, with the upper band two standard deviations above it and the lower band two standard deviations below. There is little advantage to tweaking them. You can experiment with a variety of strategies, but use caution. Riding the bands when a market is trending is tempting, and a price touching the band is not necessarily a buy or sell signal. Just remember: markets only trend about 20% of the time. Trading between the bands can still be profitable and is less risky. Don’t rely on the bands. Use other market indicators, such as P&F targets or Fibonacci retracement levels, to make decisions based on a broader set of criteria. Continuing to research and learn is probably the most important thing you can do if you want to make money trading. It is never as simple as downloading software or a new app. You need to be constantly carrying out research, reading reviews, consulting broker comparison sites and studying the markets to ensure you are building your trading skills and using the tools, apps and brokers most suited to your situation.

Conclusion:

Bollinger Bands: Our Verdict

Bollinger Bands are a powerful, useful, technical indicator for traders at all levels. You can easily set them up in most trading apps, and they can be used within other systems you may be using already, such as the MT4 app. They are easy to read and can be used alongside other tools and systems to develop trading strategies that fit your talents, interests and attitude to risk. They can be used in all global markets, including forex trading. It is, however, important to remember that the bands are simply a technical indicator and cannot tell you the optimal time to buy or sell stock, or trade currencies. Consulting them alongside other market indicators will tend to bring the best results. The decision-making is still up to you, but this simple tool will enable you to better predict long-term price moves, and see clearly when a market is trending or ranging. Most of the price data you need to make trading decisions is right in front of you. It’s easy to see why many traders are impressed with this system. It is definitely worth spending a little time with it and seeing if you can develop some profitable strategies based on those three simple little lines.

CFD Highlights