A swing trader usually has his trades open from days to weeks. Keeping a position open for that long can be quite risky, especially in forex market where the market movement is really volatile, thus you’ll need solid swing trading strategies. These strategies can be applied by all traders, but it’ll be easier if they match your trading style.
Identifying the Trend
The purpose of swing trading is entering trades in the direction of the major trend. Thus, identifying the trend is an extremely essential initial step to master for a swing trader. The sooner you can identify the trend, the higher your chance to get massive profits.
The problem is aside from identifying a trend, you have to be able to avoid whipsaw (a condition where a sharp price movement is quickly followed by sharp reversal) too. It can be misleading and looked just like the market is trending, so make sure you can avoid it. These are several common methods to discover trends:
– Making use of indicators: probably the most widely used indicators are Moving Averages and Relative Strength Index.
– Price Action Trend
– Pivot Point Trend
I recommend using 15 minutes and 4 hours charts for this.
Look Forward To Pullback
As soon as you identify the main trend, don’t rush and place your order. Wait for some kind of pullback first to get a good entry point. By waiting for a good price level before truly entering the market, you’ll enter at a great price and have much better opportunity to score winning trades.
Stop Loss Order
Every good trader implements strict risk management and stop loss is one of it. For stop loss, just use the latest swing high or swing low. Make sure you place your fund in a trusted broker that won’t ignore your stop loss.
Exit Point
The easiest way is to shoot for exactly the same quantity of the pips you are risking. Illustration: if your stop loss is twenty pips below your entry point, then just set 20 pips above your entry point as the exit point (take profit order). Needless to say, it’s possible to aim higher than the amount of pips you risk; it’s completely up to you.
This is just one example as there are a lot of swing trading strategies out there. A few of them may need you to learn more advanced strategies or making use of more sophisticated software; nonetheless, if you’re still learning, it is advisable to stick to one currency pair and get used to it. Also, know the best time to trade for that specific currency pair.
There are hundreds of strategies variation for swing trading, but the fundamental is the same: finding a trend and ride on it to get as much profit as you can. Just like that. People just discover a lot of different way to do that, so just go with one that suits you the best.