Swing trading gained its popularity as far back as in the beginning of XIX century. Swing-trading finds duration of previous Forex market swing against technical structure of market and on forecasting the next swing.
Main advantage of this Forex trading strategy is that you can get profit regardless of the direction of market.
Over decades, swing trading term was only applied to the situation on the futures trading market, when a trader had held open position for more than three days until received highest profit from cyclical price fluctuations both in sales and buying. This method is applicable today as well for any order that does not require an active intraday trading. But real opportunities of such an efficient trading art and such a generalized approach puts certain limitations. Under the conditions of an absolute liquidity of financial markets, a trader can find excellent chances on daily, hours' or minute's charts.
Historical research shows that market tends to avoid trends, that is to say, to stay in “flat” conditions for a longer time than in trend conditions. There are a few trading methods used in flat markets. “Swing-trading” is one of the most popular trading method, main principle of which is to find the market caught in trap of flat price range otherwise called confluence.
In swing-trading (especially when it comes to Forex trading strategies) one can use both two- and three-bar swing.
Three golden rules for swing trading
Pic. 1 Passing the second Low; on the second High
There are three, five and nine-cycle models. Based on that, entrance to market is planned.
Pic. 2. While rolling back from a new High; while bouncing off a new Low
Bounces give prices the chance to jump in “going” train. They also provide market with “fuel” allowing it to continue with growth or decline.
Pic. 3 On support level; on resistance level.
When on its way price faces hindrance, it has just two options: either continue movement in the same direction it had moved before or turn to the opposite direction. One has to anticipate a right option coming from repeating pattern. To make a correct choice in swing-trading from resistance and support level, one can use channel.
Swing-trader must be sure to use protective Stops. An appropriate area for placing protective Stop – just after resistance or support level.
Mane rules for swing-traders
- Swing-traders are supposed to adhere a number of very simple rules:
- If trade moves to your side, transfer it to the next day;
- If your entrance is correct, market must shift favorably almost at once;
- Do not leave loss trade for night. Leave and open better position the next day;
- If market does not work as you expected it to, leave at the first roll back;
- If market suddenly offers you a high profit, take it;
- Use dense Stops, when you trade on swings;
- The goal is always to minimize risk and establish “break-even”;
- If you doubt – leave!
- Learn to wait!
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- Candlestick Analysis
- Exponential Moving Average
- Accumulation Swing Index
- Forex Fractals Trading Strategy
- How to use MACD Indicator