Forex Swing Trading

Swing trading is a fundamental type of short-term market speculation where

positions are held for longer than a single day. It can be used to trade in forex,
futures, stocks, options, ETFs and cryptocurrency. This page will take an in -depth
look at the meaning of swing trading, plus some top strategy techniques and tips.
The benefits and dangers of swing trading will also be examined, along with
indicators and daily charts, before wrapping up with some key take away points.

What is Swing Trading?

The straightforward definition of swing trading for beginners is that users seek to
capture gains by holding an instrument anywhere from overnight to several
weeks. As training guides highlight, the objective is to capitalise on a greater
price shift than is possible in an intraday time frame. But because you follow a
larger price range and shift, you need calculated position sizing so you can
decrease downside risk.

To do this, individuals call on technical analysis to identify instruments with short -

term price momentum. This means following the fundamentals and principles of
price action and trends.

Swing trading setups and methods are usually undertaken by individuals rather
than big institutions. This is because large enterprises usually trade in sizes too
great to enter and exit securities swiftly. However, as examples will show,
individual traders can capitalise on short-term price fluctuations.

Swing Trading Benefits

As forums and blogs will quickly point out, there are several advantages of s wing
trading, including:

 Application – Swing trading can be effective in a long list of markets and

instruments. For example, you can speculate on the latest altcoins, such as a
bitcoin (BTC), ethereum (ETH) and litecoin (LTC). Alternatively, you can stick to
swing trading with standard options.
 Resources – There is a wealth of online resources to help you become one of the
success stories. You have Ebooks, video training courses, PDFs, apps, tutorial
classes and a whole host of websites. All can provide ideas for forex strategies,
general trade plans and top tips for identifying patterns. In addition, join the
Discord chat to take part in an active swing trading group.
 Tools – You can swing trade using candlesticks and other techniques on any
number of platforms, from Robinhood to MetaTrader. There is also the option of
employing automated bots and expert advisor software (EAs). Used correctly,
 these can allow you to execute far more swing trades than you ever could
manually.
 Mindset – As success stories show, if you have the attributes needed to
effectively day trade, you may well have those required to swing trade. For
example, are you patient? Do you mind having big stop losses? Are you happy to
take fewer trades while being meticulous with the few setups you do make? If yes,
you may already have the qualities and discipline of a successful swing trader.

Risks
Before you give up your job and start swing trading for a living, there are certain
disadvantages, including:

 Market risk – Rule 101 – you can definitely lose money. Although some have
made it look easy, any mistakes will be felt where it hurts the most, your income.
And unfortunately, as is the nature of market speculation, lessons are often only
learnt the hard way. In addition, trading on margin and using leverage could see
you lose more than your initial investment.
 Time – Swing trading isn’t one of the types of trading where you can enter your
position and just check it a week or so later. It is live trading and the strategies
that work require consistent monitoring. This means juggling swing trading with a
full-time job may be challenging.
 Taxes – Swing trading does not necessarily exempt you from taxes. In fact, in the
US, for example, you may get caught up in pattern day trader laws. So check you
can meet any obligations in your financial system first.
 Risk management – Whether you’re interested in penny stocks or using an
algorithm service, failure to implement an effective risk and money management
strategy could cost you dearly. As successful trader Harry Lite said, “Throughout
my financial career, I have continually witnessed examples of other people that I
have known being ruined by a failure to respect risk. If you don’t take a hard look
at risk, it will take you.”
 Psychology – Do you like a dynamic, fast-moving trade environment? Are you
impatient with a need to know whether you’re right or wrong straight away? If so,
you may not have the mindset needed to become a millionaire and master of
swing trading.

These are by no means the set rules of swing trading. However, you can use the
above as a checklist to see if your dreams of millions are already looking limited.

Day Trading vs Swing Trading

The main difference is the holding time of a position. Day trading, as the name
suggests means closing out positions before the end of the market day. However,
as chart patterns will show when you swing trade you take on the risk of overnight
gaps emerging up or down against your position. As a result, when swing trading,
you often take a smaller position size than if you were day trading, as intraday
traders frequently utilise leverage to take larger position sizes.
Having said that, swing traders can capitalise on up to 50% overnight margin. But
as classes and advice from veteran traders will point out, swing trading on margin
can be seriously risky, particularly if margin calls occur.

So swing trading or day trading isn’t so much about what you want to trade, be it
commodities, such as oil futures or stocks from the Cac 40. Instead, it’s simply
the time. So while day traders will look at 4 hourly and daily charts, the swing
trader will be more concerned with multi-day charts and candlestick patterns. In
fact, some of the most popular include:

 Moving average crossovers

 Head and shoulders patterns
 Cup-and-handle patterns
 Double bottoms
 Shooting stars
 Triangles
 Flags

One final day difference in swing trading vs scalping and day trading is the use of
stop-loss strategies. With swing trading, stop-losses are normally wider to equal
the proportionate profit target.

What Stocks to Swing Trade

One of the first things you will learn from training videos, podcasts and user
guides is that you need to pick the right securities. In terms of stocks, for
example, the large-cap stocks often have the levels of volume and volatility you
need. These stocks will usually swing between higher highs and serious lows.
This means you can swing in one direction for a few days and then when you spot
reversal patterns you can swap to the opposite side of the trade.

Finding the right stock picks is one of the basics of a swing strategy. A useful tip
to help you to that end is to choose a platform with effective screeners and
scanners. There’s simply no use having the best strategy if you’re speculating on
the wrong low-priced stocks.

The Right Market

Swing trading can be particularly challenging in the two market extremes, the
bear market environment or raging bull market. Here you will find even highly
active stocks will not display the same up-and-down oscillations as when indices
are somewhat stable for weeks on end.

Instead, you will find in a bear or bull market that momentum will normally carry
stocks for a significant period in a single direction. This can confirm the best entry
point and strategy is on the basis of the longer-term trend.
Essentially then, it is when the markets aren’t heading anywhere that you have
the ideal swing trading environment. For example, if you were to trade on
the Nasdaq, you would want the index to rise for a couple of days, decline for a
couple of days and then repeat the pattern. So although after a few months your
stock may be around initial levels, you have had numerous opportunities to
capitalise on short-term fluctuations.

Using the Exponential Moving Average

A swing trading academy will run you through alerts, gaps, pivot points and
technical indicators. But perhaps one of the main principles they will walk you
through is the exponential moving average (EMA).

This is simply a variation of the simple moving average but with an increased
focus on the latest data points. Used correctly it can help you identify trend
signals as well as entry and exit points much faster than a simple moving average
can. Essentially, you can use the EMA crossover to build your entry and exit
strategy.

Application
An EMA system is straightforward and can feature in swing trading strategies for
beginners. You can use the nine-, 13- and 50-period EMAs. Your bullish
crossover will appear at the point the price breaches above the moving av erages
after starting below.

This tells you a reversal and an uptrend may be about to come into play. Then if
your nine-period EMA exceeds the 13-period EMA, this alerts you to a long entry.
Having said that, the 13-period EMA must be above the 50-period EMA or actually
cross above it.

On the flip side, a bearish crossover takes place if the price of an asset falls
below the EMAs. This tells you there could be a potential reversal of a trend. You
can then use this to time your exit from a long position.

So if the nine-period EMA breaches the 13-period EMA, this alerts you to a short
entry or the need to exit a long position. Having said that, the 13 -period EMA
must be below the 50-period EMA or cross below.

Utilise the EMA correctly, with the right time frames and the right security in your
crosshairs and you have all the fundamentals of an effective swing strategy.

Psychology of Swing Trading

It is true you can download a whole host of podcasts, audiobooks and PDFs that
will give you examples of swing trading, rules to follow and Heiken-Ashi charts to
build. However, what they often won’t tell you is how to mentally react when your
swing trading strategy doesn’t work.
With that said, you should consider the following three tips:

1. Have a plan and stick to it – There will be highs and lows, that is the very nature
of buying and selling in the markets. However, let the maths dictate those ups and
downs, do not let your emotions get in the way. Deciding when to sell can quickly
become an emotional decision when you have your whole weeks returns on the
line. So, formulate a strategy and then stick to it religiously.
2. Combat fear by reducing risk – Everyone’s appetite for risk is different. So find
risk parameters that suit. For example, you may want to start by not risking more
than 2% of your account size on a single trade. This is something no mentor can
teach you. Only through hours of practice will you learn where your personal limits
are.
3. Think long-term – Too many traders obsesses over the last trade or the next.
Don’t worry if you just lost on gold futures. Instead, think about your long -term
profit percentage and calculator. As Bruce Kovner aptly pointed out, “If you
personalize losses, you can’t trade.”

Swing Trading Top Tips

Even some of the best forex books leave out some of the top tips and secrets of
swing trading, including:

 Utilise the news – Markets are constantly moving in reaction to news events.
Many resources, such as Yahoo Finance and CNBC will provide market analysis
and commentary, using volume, price action and weekly charts. Therefore, used
correctly, the news could help you highlight potential options and dividend stocks
to keep an eye on, for example. It could also help you plan your entries and exits.
 Never stop learning – As Paul Tudor Jones famously said: “The secret to being
successful from a trading perspective is to have an ind efatigable and an undying
and unquenchable thirst for information and knowledge.” There is a wealth of
information available to help you develop effective cryptocurrency and forex
strategies. Video tutorials, for example, can help teach you Gann techniques and
how to start using weekly deep in the money options. They can also run you
through indicators for your MT4 platform and the setting up of daily stock alerts.
 Find the right broker & exchange – Everyone has different needs and priorities,
so while one crypto swing trader may be best off on Gdax or Binance, a highly
active forex swing trader may want to consider Dailyfx. Note they are also more
than a place to consider quotes and exchange securities. They can help you build
a diverse watchlist, portfolio, and so much more.
 Keep a Journal – Keeping an Excel journal can prove invaluable. Simply note
down price, date, position size and a reason for entry and exit points. This could
help you see why your breakouts plan for currency pairs does not work on week ly
charts, for example.
How Much Money Can You Make?
Swing trading returns depend entirely on the trader. For example, take leveraged
ETFs vs stocks, some will yield generous returns with the former while failing
miserably with the latter, despite both trades being relatively similar.

It will also partly depend on the approach you take. Some individuals will praise
MACD indicators while others utilise an NMA system. Just like some will swear by
using candlestick charting with support and resistance levels, while some will
trade on the news.

The key is to find a strategy that works for you and around your schedule.

Final Thoughts
Although being different to day trading, reviews and results suggest swing trading
may be a nifty system for beginners to start with. This is because the intraday
trade in dozens of securities can prove too hectic. Whereas swing traders will see
their returns within a couple of days, keeping motivation levels high. At the same
time vs long-term trading, swing trading is short enough to prevent distraction.

On top of that, requirements are low. You need a brokerage account and some
capital, but after that, you can find all the help you need from online gurus to try
and yield profits. Furthermore, swing trading can be effective in a huge number of
markets.

But although learning how to start swing trading as a part-time or full-time job may
be relatively straightforward, your capital is at risk. Therefore, caution must be
taken at all times.