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Swing Trading Forex

 
     
  On this page you will learn about a subject close to the theme of this site: Swing Trading the Forex Market.

 
 
     
 
 
     
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Swing Trading the Forex Market

Swing trading has long been one of the more popular forex strategies for both beginning and experienced traders. In general, this strategy involves the opening of positions that will last for 10-15 days at most. The definition and characteristics of a swing trading strategy differs from trader to trader, and the duration of an average position is usually the most important value for determining if a trader is swing trading.



Swing trading forex is popular because it combines the best aspects of two different styles into a form that is workable and profitable. Day trading or scalping, are thought to be low risk because the trader can use tight stops and be exposed to the market for a short while, while still profiting from the price action. Long term trading is believed to be more comfortable and successful because in the longer term market action is more predictable. For example, although we may not know if the Fed's interest decision will cause a big impact on market action on the day of its release, we do know that in the long term the impact will be felt strongly and decisively. Swing trading doesn't require that we make trading decisions as quickly as a day trader. But it also doesn't expose us to the vagaries of the market for as long as long term trading does. It's the middle path, and as such it is less stressful, more visible and easier than the other approaches on the ends of the spectrum.

Swing traders are not very interested in trends. They seek range patterns, consolidation or continuation formations which can be exploited safely in the confines of the swing trader's favored timeframe. As the price swings between the two ends of a range that defines the developing formation, the swing trader does his best to exploit the movements for short term gain and as soon as the formation breaks down, he leaves the scene, refusing to take part in the chaotic phase of market action.

Swing trading is safer because it is of shorter duration. Since the trader seeks a range pattern to exploit, the maximum loss or profit is already established and in the absence of shocks, it is easy to control the risk/reward potential of a trade with reasonable accuracy. Of course it takes time before a trader has a reasonable degree of mastery over this style, but the learning process is less painful than it is with any other trading method.

 

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