Swing trading Forex

 

Swing trading is one of the few techniques, which may be successfully used by not only a professional Forextrader, but by a trader, who spends on trading just a little part of his/her time. One of the main advantages of this technique is that a trader is not to spend so many hours sitting in front of a computer.

This trading method is based on the grab of one price fluctuation (large price movement), and on the exit trade after the correction of trading asset market price appears. A trader has to take a larger part of asset’s value before a market reversal point. Despite the fact that entering the market at the reversal point can seem quite beneficial.

Most suitable trading time

In accordance with the swing trading technique, a trader doesn't have to trade at the beginning of the European and American sessions and during the release of important news. There is a big danger that the market trend will change its direction.

As a rule, professional traders prefer a day-trading. This is because in this case it is not necessary to constantly watch the changes in assets prices, as with scalping trading.

In case a trader correctly determines the bottom of the next market pullback, then after the trading position is closed, the price will move in the direction of the main market trend, increasing the profit made from an order opened.  In case it's not observed for several periods of the selected time-frame, the open order has to be immediately closed.

Attention! For trading beginners it's highly recommended to use stop orders: for timely fixation of profit and limit losses.

It's not necessary to hold trading positions opened for more than 2-3 periods, if they cause losses. The orders have to be closed at the first deep pullback in the right direction.

To trade by the swing method a trader can use any additional tool of Forex technical analysis  — from volumes and important levels with graphic shapes to the candlestick patterns. Choose the preferred trading tool in order to find the best moment to open a trade, and wait for the  moment when price will be located between several Moving Average. After getting signals from the chosen tool, sell or buy a trading asset.

Main rules of the swing trading

For the successful swing trading you should follow the rules:

In case the market provides an opportunity to make profit, it should not be abandoned;

Don't trade if you are not sure about the direction of price trend movement;

If the market has not moved in the direction you want, you have to close the positions at the very first market pullback;

For trading in Forex you have to to use tight stop loss;

If the asset price is moving in the desired direction, it should be left the next day;

If the position is opened by mistake, this positions doesn't  need to be left the next day, and has to be closed immediately.

Traders who want to trade by using the swing method should be able to wait.

Specific advantages and disadvantages of the trading method

There are many advantages that swing trading has. And one of this advantages is the suitable number of opened positions. You can make rare, but accurate trading positions. It's not necessary to overpay the extra commissions to the dealing center or broker, as is the case with the scalping trading method.

However, it's possible to exit from an inactive financial market before the trading turns to a long-term investment. The time period of the positions' opening - two or three days - is a period that allows a trader to make profit with an correct level of risk and minimum stress.

The swing trading method is considered as a safe one, because the trades are made when a price trend is already defined, at the final stages of price correction after the entry point has been formed. It's perfectly suitable for both the market "bears" and for "bulls". It allows a trader to make trades for the buying and selling of assets.

But there are also disadvantages of the swing trading method:

Remoteness of the set stop orders from the market entry point;

The necessity of high-precision calculations of trades volumes;

Demanding on the capital amount;

In addition, some beginners find it hard to select the correct technical tool to accurately determine the price swing.