Forex Swing Trading Methodology
Swing Trading Strategy offers procedures for managing position opening and closing as long as market conditions experience a strong trend.
If you are still just learning Forex trading, chances are this is the first time you meet the term Swing Trading. It is a common knowledge, most beginner traders really like scalping or day trading. Some of them still survive with short-term trading styles, but some are not at home, then look for new trading methods.That’s why the Swing Trading Strategy is a promising alternative.
What is Swing Trading?
Understanding most easily, Swing Trading is a strategy of execution of market order placements (Buy or Sell) when the price is moving to one direction during a certain period. While traders who often use this system are often dubbed ‘Swing Traders’.
Swing Traders usually look for currency pairs with a wide range of trading . However, in order to run well, an effective Swing Trading system is needed that at least pays attention to two basic and very important components, namely the identification of trends correctly and stop loss .
Comparison of Swing Trading with Scalping
Beginning first acquainted with the world of trading, beginner traders must find all sorts of ways to gain profits in the shortest possible time. From there, most of them have been fed with all kinds of scalping tips and tricks, right?
Indeed, Scalping is quite easy to do, but the risk is also relatively large. To get a profit, a trader is usually provoked to open many positions at one time. This high-risk habit will become even more dangerous if the novice trader does not understand Money Management properly.
Because the position opened more than one, traders are required to dedicate a large amount of attention and time, in order to monitor the accumulation of points each position . It does not matter if you do have free time, but if you are busy, it will cause heavy losses on trading accounts. The solution, Swing Trading Strategy offers flexibility and ease in managing trading position setup.
First, the Swing Trading Strategy does not require the trader to open many trading positions . One position per week is enough to make a profit. Every position on Swing Trading makes the most of the trend movement. The expectation is that every position of the Swing Trading strategy is targeted to reach hundreds of Pip.
Second, each position focuses on quality, not quantity . Dispose of bad habits to open many positions. Swing Trading strategy focuses on signal accuracy and risk management for each position, from opening to closing.
Third, the trading system strategy applies the principle of “set and forget” . Because every Swing Trading position has been secured with risk management and the target is also clear, then you no longer need to keep an eye on continuous price movements.
The three factors above clearly provide an advantage for traders with high activity, but before learning to apply the Swing Trading strategy, you must understand the understanding and discipline of the system.
Basic Swing Trading Application
To get a Swing Trading signal, we need to identify the direction and strength of the trend first. It should be noted, the success of the Swing Trading strategy largely rests on the process of identifying the direction of movement of the trend.
Many methods to recognize the direction and strength of the trend, but the simplest way is to observe the price movement itself on the chart (chart).
After recognizing the direction of the trend, the next task is to determine where the price will potentially move later . Remember, the key word is “potential”, so as good as anything signals the Swing Trading strategy, there is certainly the possibility of missing. Relax, we will learn how to handle the worst case scenario by setting up a trading system.
Developing Swing Trading Systems
The trading system is basically a guide for traders to determine what trading steps should be taken when conditions A to Z appear. Rules for opening and closing trading positions also include important components in a system.
There are several indicators that we can use to develop Swing Trading systems, for example Weekly Pivot Points . Pivot Points can indicate where the Support and Resistance are objectively, so we don’t need to guess or draw ourselves where the S / R is.
Support and Resistance can help us to know at what price level the price will potentially continue to move in one direction only or even reverse direction . For example, if the price is climbing, then the Resistance level is its “visual limit”, if the price is able to penetrate it means it will most likely continue to skyrocket. Conversely, if the price displays a resistance candlestick like Pin Bar , it means there is potential for a trend reversal.
Stop Loss or loss sale is also an important component in a trading system. Many Forex traders usually execute market orders with the Swing Trading Strategy without first setting up the Cut Loss level. In fact, there is no trading system that guarantees 100% win rate.
In order for losses to be controlled, the Swing Trading system must be able to clearly determine the Cut Loss level. The trick is to implement a Risk Versus Reward ratio with discipline . If you have opened a position, the distance between SL and TP can be determined by calculating the Risk / Reward ratio.