Swing Trading Strategies

How to Develop Simple Swing Trading Strategies

There is a lot of retail trading strategy available on the internet. Moreover, many trading strategies have been created by famous mathematicians and analysts. All trading strategies have some unique methodology and unique characteristics that do not compare with another. Means one plan can be usable by a person at the same procedure might bring loss for another trader. Identifying the right trading strategy is the key to be successful in the industry.

Forex trading requires patience and practice to be successful. However, successful traders use the same trading strategy that new traders intend to use. There is no rocket science for magical methods that dream money to the successful traders only. The challenge for the new traders is to follow the trading methodology and rules very strictly.

Swing Trading in Forex Market?

Swing trading is a kind of long-term trading system that requires calmness to hold trades for a few days. The swing trading style is perfect for traders who do not have time to monitor charts all day. So, the swing trader needs to allocate some hours in analyzing the market on a daily basis. This trading system is suitable for full-time jobholders or business as they don’t have time for full-time trading. Besides their regular works, they might have free time to perform market analysis that is going on in the worldwide economies.

Market swing happens when price forms a lower low or higher high than other surrounding prices. Swing trading identifies the “swings” in a medium-term trend to enter only on a high probability setups. for instance, in an uptrend, traders usually buy “swing lows.” On the other hand, in a downtrend, traders need to promote “swing highs.”

In swing trading strategy, most of the trades final plenty longer than one day. If so, larger losses with an appropriate equity management plan. The principal mission for swing investors is to not panic for the short-term market volatility. The trader ought to be conscious of the analysis and stay calm at some point in those times. For the reason that trades have larger take earnings goals, spreads will not have an effect on the general gains.

For swing trading, trading pairs with decreased liquidity and larger spreads are appropriate.

Swing Trading Strategy for Beginner Traders

Swing Trading Strategies

In this section, we will see step by step approach how you can get yourself involved in the swing trading strategy based on price action:

#1 Understand the Market Context

Market context is the key to get into the price action trading. Every financial market moves with the same context. When an impulsive bearish pressure comes, all retail selling opportunities will work well. On the other hand, no strategy will work well when the market is within volatility. Therefore, we should follow the concept of market context well:

  • The impulsive pressure comes when the market aggressively creates new highs and lows by following the same direction over and over again.
  • Corrective momentum stands for when the market moves with a momentum that barely creates new highs and lows. The presence of the opposite party reduces the market momentum in the corrective structure.
  • Volatility comes when the market is decisive. Traders cannot identify where the market is heading. In this situation, both buyers and sellers remain present in the market.
  • Non- volatility comes with the impulsive trend. It indicates the domination of a single party over the market. Therefore, the market moves in the same direction. 

#2 Top Bottom Analysis

After understanding the market context, the traders’ duty is to understand what big players are doing in the market. As we know, big players play with a more significant investment they intend to remain on the higher timeframe. Therefore, In this strategy, we will see where the price is heading in the weekly timeframe.

The critical levels in the weekly timeframe are known as the key levels. If the price goes below the key level, the overall market outlook is bearish. On the other hand, if the market is above the key levels, it means the overall outlook is bullish.

In swing trading, we will consider the timeframe from weekly to 4 hourly charts to identify potential swing and we will ignore intraday trades as it might be violated by short term volatility. 

#3 Identify Market Levels

Swing Trading Strategies

After identifying the key levels, we will see major support and resistance levels in the daily timeframe. Any bullish rejection from the daily resistance levels and bearish rejection from daily support levels will work as a key price sentiment for traders.

However, the main aim of price action traders is to identify the event levels.

What is the event level?
It is the level used for both support and resistance levels. The reason behind the importance of this level is that both buyers and sellers find this level as important. So we will buy and sell currency pairs from these levels only.

#4 Candlestick Pattern

If we summarize the system, we can find tho following sequential matter-

  • Identify key levels and event levels.
  • Wait for the candlestick formation towards the direction of key levels from an event level.
  • Stop loss at above or below the candlestick pattern with some buffer.
  • Take profit is based on the next support or resistance levels and market context.

Always make sure to use appropriate money management for each trade and never take a risk that is higher than the return.