Trading Strategies Comparison: Inducement vs Swing
Many traders using Smart Money Concepts (SMC) face a frustrating problem: the seemingly limited number of clear trading opportunities. This perception often stems from strict reliance on a single method to confirm market highs and lows: the Inducement strategy.
While precise, this approach can cause a trader to miss an entire trend if they miss the initial entry point. The goal of this article is to compare the Inducement method with Swing, an alternative approach that can reveal a multitude of hidden opportunities on the same chart.
The Inducement Strategy: Precision Over Frequency
What is Inducement?
Inducement is a method used to confirm the validity of a high or low within a trend. It provides a robust confirmation signal before making a trading decision.
In an uptrend, Inducement is defined as the last pullback movement that formed the highest high. When price breaks this pullback downward, it confirms the creation of a valid high.
This confirmation is crucial because it signals that the pullback phase has likely begun. The trader can then focus on identifying the next valid low (often near an Order Block or demand zone) to plan their buy entry, in perfect synchronization with the expected trend reversal.
Main Advantage: High-Quality Entry Points
The strength of the Inducement strategy lies in its ability to identify excellent entry points. By waiting for this specific confirmation, the trader avoids premature entries and can position themselves at the beginning of a major trend, thus capturing significant market movements from start to finish.
Major Drawback: Risk of Missing the Trend
The main flaw of this method is its lack of flexibility. If a trader misses the initial entry point confirmed by the Inducement break, they risk not finding another opportunity to join the trend. Price can continue rising for a long period without ever breaking a new Inducement to confirm a new high. The trader then becomes a mere spectator of a trend they correctly identified but can no longer participate in.
It is to solve this problem that the Swing strategy becomes an essential tool.
The Swing Strategy: Multiplying Trading Opportunities
Unlike Inducement, which waits for a specific market event (the break of a pullback), the Swing strategy identifies highs and lows based on a precise candlestick structure.
Defining Swings: New Highs and Lows
A Swing High and Swing Low are identified using a simple five-candlestick pattern.
- Swing High: Look for a candle whose high (upper wick) is higher than those of its two left neighbors and its two right neighbors. This five-candle formation acts as a local peak, signaling a swing high.
- Swing Low: Look for a candle whose low (lower wick) is lower than those of its two left neighbors and its two right neighbors. This five-candle formation acts as a local trough, signaling a swing low.
Fundamental Rules of Swing Structure
For this structure to be valid and useful, it must respect two fundamental rules:
- Mandatory Alternation: A Swing High must be followed by a Swing Low before a new Swing High can form. There cannot be two consecutive highs without a low between them, and vice versa.
- Confirmation by Break of Structure (BOS): In an uptrend, a new Swing High is only valid if price has first broken and, crucially, closed above the previous Swing High. A simple spike with a wick is not enough to confirm trend continuation and validate the new structure.
Key Point: This mechanical approach allows for identifying many more structural points than the Inducement method.
Comparative Table: Inducement vs Swing
This table summarizes the key differences between the two approaches for identifying market structure.
| Criteria | Inducement Strategy | Swing Strategy |
|---|---|---|
| Trigger | Break of last pullback | Formation of 5-candle pattern |
| Signal Frequency | Low; often a single opportunity at the start | High; multiple opportunities (Major and Minor) |
| Ideal For... | Catching the start of a major trend | Joining a trend already in progress |
Practical Application: From One Opportunity to Seven
Let's take an example of a chart in a strong uptrend to illustrate the impact of each strategy.
The Inducement Scenario: The Endless Wait
Analyzing the chart with the Inducement method, a trader would have identified an excellent entry point at the very beginning of the trend. However, after this first trade, price continued to rise aggressively. Since none of the small pullbacks were broken, no new valid high was confirmed according to Inducement rules. Result: the trader missed the entire rest of the rise, ending up with a single trade where dozens of others were possible.
The Swing Scenario: Identifying Hidden Opportunities
Applying the Swing method to the same chart, the picture changes dramatically. The analysis reveals two types of structures:
- Major Swing: The main large-scale structure that defines the underlying trend.
- Minor Swing: The smaller price movements that form inside a Major Swing.
The Major Swing gives us the direction of the wind (the underlying trend), while the Minor Swing offers us the waves we can surf (entry points within this trend). Here's how this translates into concrete opportunities:
- The first Major Swing Low and Major Swing High confirm the initial trend, offering the first opportunity.
- As price progresses, we focus on the internal structure, that of Minor Swings.
- Observe now: as soon as price breaks and closes above a Minor Swing High, we have our confirmation (BOS).
- This action immediately validates the last low point as a relevant Minor Swing Low. It is precisely this low that becomes our new opportunity search zone.
- We wait for a slight pullback to this zone to enter a position with controlled risk.
- By repeating this process with each new minor structure break, Swing analysis identified up to seven distinct trading opportunities on the same portion of the chart where the Inducement method saw only one.
Practical Tips for Traders
Use Inducement When:
- You want to enter at the beginning of a new major trend
- You're looking for high-quality entry points with strong confirmation signals
- You have the patience to wait and confidence in your initial analysis
Use Swing When:
- The trend is already established and you want to join it
- You missed the initial entry point and are looking for a second chance
- You prefer active trading with multiple opportunities
Combining Both Strategies:
The best traders combine both methods: they use Inducement to identify the main trend and the first optimal entry point, then switch to Swing to take advantage of additional opportunities during trend continuation.
Conclusion: Choosing the Right Approach for Your Trading
The main difference between the two strategies is their purpose. Inducement is a robust but restrictive method, ideal for identifying major reversal points and entering at the beginning of a trend with strong conviction. On the other hand, Swing is a more flexible and frequent method that excels at finding low-risk entry points within an already well-established trend.
For the trader who often feels left behind by the market, mastering the Swing strategy can be transformative. It allows moving from a vision where opportunities are rare to a vision where the market is full of them, provided one understands and rigorously applies its structural rules.
Remember: Success in trading depends not only on strategy, but also on discipline, risk management, and continuous learning. Understanding the difference between Inducement and Swing strategies opens new doors in the trading world. While the former gives you precision and high-quality entry points, the latter provides flexibility and numerous opportunities.
Choose the strategy that suits your trading style, or better yet, learn how to combine them to maximize your advantage from market movements.