Futures Trading With Systems: Swing-Trading Timeframe

Compared to day trading sytems, swing trading systems offer many advantages. We’ll review swing trading systems and why you should and shouldn’t trade one.

Since hold times vary from days to weeks, they can allow great trades to come to full fruition before exiting them. This means that you can capture more of the market action than a day trading system can. This is very important because many great trades take weeks or days to develop.

In addition to being better at catching large market movements, these swing trading systems typically have less transaction costs. This is possible because these systems trade less often, and because of this their average trade net profit is generally much higher. This reduces the effects of slippage and commissions on their returns.

This reduction in the effects of commissions and slippage is crucial to a investor that wants to have his futures trading system traded for him by a broker. If a broker is trading a system for a client, the broker usually charges a larger commission for offering this service, and because we aren’t trading as often these increased commissions have little effect on the system profitability.

The flip-side of the coin is that swing trading systems have drawbacks as well. They have more transaction costs than long-term systems, and don’t do as well in capturing very long-term trends as well as systems built to trade long-term.

Due to that fact that swing systems hold positions overnight, they need higher margin deposits than do day trading systems. This stems from the fact that many futures brokers offer quite low day trading margin rates, but after the closing bell, the required margin reverts back to the exchange-set minimums.

As a direct result of holding positions overnight, they also expose the investor to more risk. This increased risk stems from market moving events that can happen overnight, or early in the morning, and these can cause large fluctuations in prices at the start of the next session. This tends to be most common for futures based on commodities such as grains, where news of crop failures can send prices skyrocketing in just a few hours.

Unlike long-term timeframe systems, swing systems do offer the investor the ability to reallocate his portfolio rather quickly. This matters most when the investor wants to capitalize on activity in another market and needs to take advantage of it quickly.

When considering everything, swing trading systems appear to offer the best overall benefits for many investors compared to day trading and long-term futures trading systems. They offer the ability to capitalize on significant market swings, less transaction costs, and react to new market opportunities quickly.

In need of futures trading systems? Midas Trading Systems offers dozens of futures trading systems.


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