Forex swing trading is a very popular form of currency strategy that is widely used by beginning as well as experienced traders. It is a strategy that requires the trader to open positions for between ten and fifteen days. Each trader will define Forex swing trading in different ways and there will also be variance in the duration that a trader holds their position.
Capturing Reactions
Forex swing trading aims to capture reactions within important trends (which can be bearish or bullish) with a view to seeking and take full advantage of trades that generally stay open for few days or an entire week. This makes this form of dealing a short term method.
Basics of Forex Swing Trading
This form of dealing is generally carried out between two different levels: support as well as resistance levels that are known to exist within a key trend. Traders will need to keep a very close watch on the prices which can move in support or in resistance and then by taking an opposite viewpoint they can execute signals in the opposite direction.
Confirm a Swing Trade
It is important for the trader to not just take a position and then wait for support/resistance levels to hold. Instead, they will need to look for confirmation which means acting on turns and waning price momentum shifts that confirm either support or resistance will hold after which they will only need to execute trades based on these holding positions.
However, true swing trading is more about looking for range patterns than depending on trends. In fact, the trader will be looking for formations that can either be consolidation or even continuation and they are sure to exploit in a safe manner.
As and when prices start to swing between the two different ends of a range within a defined formation, the trader can exploit these movements and earn profit in the short term and must exit as soon as the formation shows signs of breaking down.
Safe Trading
Forex swing trading is safe because the trades are executed over a short period of time. As the trader looks to find a range pattern that they can exploit, there is already an established maximum amount of profit or loss that they will be dealing with. In the absence of shocks, they can control the amount of risk they take as well as the amount of reward that they can earn.
It is also important that the trader learns to place stop loss orders which have to be placed behind resistance/support levels. The trader must also operate with the help of a fixed target in mind. This target must generally be a little above the resistance and/or support that lies in the same direction in which they are making their trades. As soon as the prices reach the target level, the trader will then book their profits.
Swing trading is best suited for use when conditions are volatile and when the trade is done in liquid currencies. The EURO, British Pound, Yen, Canadian/Australian dollar and the Swiss Franc are ideal currencies in which to trade with the Euro and YEN being worth focusing on.
Other factors that need to be taken into account before entering into Forex swing trading include impact of commission and lastly be sure to keep things as simple as possible.
About the Author
Harald Reno is publisher of http://www.ForexWealth4U.com. On his website he provides information on Forex Swing Trading. You can also register for FREE Mini-Course on “Forex Trading Tips” to gain rare insight into Forex Trading.
