Adjust the Forex Trading Strategy with Your Trading Style (Part II)
In the previous article (Part I) we have discussed the type of “day trading” as well as several alternative forex trading strategies that can be applied to this type of forex trading.
This time, we will discuss two other types, namely “Swing Trading” and “Position Trading”.
Like day trading , this type of swing forex trading is also a type of short-term forex trading. The fundamental difference between the two types is in the time frame used. Day forex trading is limited to one trading day, but swing trading can “stretch” up to more than one trading day. This is because the swing traders try to take advantage of the opportunities that can be obtained from the “swing” movement, which means “swing” price or often also called “correction”.
Similar to day trading, swing traders never hold positions (transactions) for a long period and never use a long-term scenario. The time span they use is between hours, one day, up to two or three days.
Swing traders usually target greater profits than day traders. Thus – especially for those who hold positions for more than one forex trading day – of course tolerance will also increase the risk.
In general, there are three alternative swing forex trading strategies that you can choose from, below are the strategies:
This strategy utilizes a breakout of support or resistance. The breakout can be small (as can happen on the intraday chart) or wide / far (as can happen on daily, weekly, or monthly charts).
To become a breakout trader, you always have to find a breakout point.You also have to look at when and in what conditions the breakout occurs, then take a sell or buy position.
You can take a buy position if a resistance breaks, then place the profit target near the next resistance. Instead take a sell position if a support breaks and place the profit target near the next support.
This strategy utilizes price movement corrections. The analytical tool used is usually Fibonacci Retracement, which uses mathematical calculations based on Fibonacci ratios 0%, 23.6%, 38.2%, 50%, 61.8%, and 100%.
Fibonacci ratio levels are horizontal lines. It also functions as support or resistance from price movements for the time being.
Conversely, if the price moves in a downtrend, pull the Fibonacci retracement of “swing high” to “swing low”.
Then pay attention to retracement levels of 38.2%, 50.0% and 61.8%. In this area, look for buy signals (if prices are in an uptrend) or sell signals (if prices are in a downtrend).
Reversal forex trading
This strategy can work well if the market moves “ranging” , meaning only moves in a certain price range. For example, if the price seems to be depressed after some time testing the resistance, then there is a possibility that it will move back down. In that case, the reversal trader will take short positions and the resistance level will be a stop-loss level.Conversely, if the price seems to start bouncing from the support area, then the reversal trader will take long positions .
This is the last type we will discuss. The “trader position” tries to profit from price movements in a much longer period of time than the day trader or swing trader. They will usually hold their positions for days, weeks, or even months. They also target far greater profits and consequently are prepared to face even greater total losses.
One of the keys to doing position trading is identifying which currency pair promises a long and large movement. For that they always combine technical and fundamental analysis.
Well, which type of trading will suit your character? Clearly, whichever type or strategy you choose, make sure you do enough training and understand everything that is needed before practicing it.
Congratulations on transacting.