Forex swing trading is a trading style where the purpose is to gain profits within 1 to 4 days. It is easy to learn especially for a novice forex trader and much simpler than methods like long term trend following. Technical analysis is used to find price trends and patterns for entry and exit. This provides a low risk way of trading in the forex market with potential for higher profits.
These three steps can help for successful forex swing trading:
- Watch for support and resistance
Look for at least 3 tests where trend lines are showing areas of support and resistance that you can trade into. It is crucial that you time your forex trade correctly preferably either at new chart highs or new chart lows.
- Trade when there’s momentum
When prices move firmly toward the support or resistance, then confirmation has to be looked for showing the price momentum is now turning. The indicators you should be using is the stochastic and RSI (Relative Strength Index) to find the trading signals. For example, the stochastic lines should be crossing each other and either be pointing up for support being held or down for resistance being held, then this is the signal to take the trade.
- Take profits early
Since profits can quickly disappear when forex swing trading, it’s best to take your profits early. The timing would be before the next level is tested for support and resistance. Even if the forex trade is running longer, you have to keep the odds in your favor by banking sooner than later.
Other points to consider when forex swing trading, is to place your stop as soon as you have entered the trade to close behind the support or resistance and to trade only liquid currencies like Euro, US dollar, Japanese Yen, British pound and Canadian dollar.
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