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Apply swing trading to Forex

 
     
 

On this page you can see how to apply a swing trading strategy to Forex trading. You can use the same principles for any time period!

 

 
     
 
 
     
 

Swing trading is an incredibly flexible and versatile strategy. The basic concepts can be applied to just about any short term trading possibility - stocks, options, futures and Forex. What an amazing tool!

 


     
 
 
     
 

 
     
 


On this page I will show you how to apply a swing trading strategy to trading forex. Take some time to get a grasp on the basic concepts of forex, and especially on the idea of leverage and margin. You need to know this quite well, so that you don't get overextended.


1. Trend analysis
As with swing trading, you need to first of all establish a trend. You do this in exactly the same way that you would with stocks. For whichever time period you are using (be it daily, hourly or even shorter), apply the 10ma and 30ema moving averages study (for that particular time study) to a candlestick chart. From that, you will easily see whether there is a trend or not. Again, as you would for stocks, apply the ADX study to see the strength of the trend of the particular currency pair that you are interested in.

2. Pivot point or Trader's Action Zone
Once you have established a trend, you will see that currencies oscillate in the same way that stocks do. In an upward trend, the currency will trade above the 10ma, and then swing down into the zone between the 10ma and 30ema.

In a downward trend, the currency will oscillate below the 10 ma, and swing up into the zone.

When a currency pair has entered the zone, look at the candlestick patterns which will alert you to a swing trade being formed. As soon as you have found your doji, harami or engulfing pattern (or any other pattern that you particularly like), then enter your trade.

Check for areas of support and resistance, by watching for areas where a trend will repeatedly reverse.

In an uptrend with a particular currency pair, you BUY the pair and later SELL for a profit.

In a downtrend, you SELL the pair (the same as shorting stock), and buy it back for a profit when the currency has fallen to your profit target.

Before you buy, look ahead for predictable events as you would with a stock trade. When trading stock, you look for earnings and dividend dates. When trading currency, you look for certain reports that influence the market. For example, in the USA, Non-farm payroll, Federal Open Market Committee interest rate change announcement, Retail Sales, Consumer Confidence, ISM Manufacturing Index, Gross Domestic Production (GDP), International Trade/Current Account, Philadelphia Fed Survey, Durable Goods, Beige Book reports all have a profound effect on any currency paired with the US Dollar.

3. Stop Loss and Profit target
As soon as you enter your trade, set a stop loss. AFTER that, set your profit target according to your favourite swing trading method. Again, use the same principles as you would for swing trading stock. Either have a fixed percentage, or a line of support or resistance, or the end of a long tail from a candlestick. Fibonacci lines are one of the most popular methods of predicting a profit target, because other indicators are not as obvious or rigid.

Set your profit target automatically, and then let it run!

 



 

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