Swing trading aims to take advantage of the intermediate trends, within the big long term trends and your aim is to sell at overbought levels and buy at oversold levels.
Trades typically last for a few days to around a week and it's a great method for new traders for the following reasons:
- You get plenty of trading opportunities
- You get profits and losses quickly so its easy in terms of discipline
- Its very simple to spot overbought and oversold levels
Swing trading is much easier than trend following as you don't need to have the patience to wait for long periods for potential trades to emerge and you don't have to be disciplined for long periods while the trend is in motion, as your trades are completed quickly.
It's also very easy to learn swing trading and all you have to do is have a concept of overbought and oversold.
Prices will always be pushed to far away form long term value and at these levels you will look to hit trading signals to take advantage of these levels.
To do this all you need to do is look for support and resistance levels on the chart and watch the price approach them but don't make the mistake most traders do of assuming the levels hold wait for confirmation.
Confirming the Move
To confirm the move you need to check the momentum of price - if it starts to fall into resistance, or turn up into support you have a potential swing trading opportunity.
You need to use some momentum oscillators to confirm moves. To do this and all these are visual ones, you learn in a few days:
The stochastic, RSI, MACD and the ADX line.
Only use a few that you like and you can test them up until you're comfortable.
Another good indicator for isolating oversold overbought levels is the Bollinger Band which, you can use in conjunction with trend lines and they will also help you establish targets too. You use them to set up the trade not confirm it but for that there a great tool.
Profit taking
I swing trading profits need to be taken at target if you are short and coming to a level of support don't wait for the test, take your profit and bank it and the same is true in a bear market. If you don't nip your profit in, you will more often than not see it disappear.
A fun and Profitable Way to Trade
Forex swing trading is simple and you can learn it in about a week; it's a fun, profitable way of trading and if you include it in your forex trading strategy, you can enjoy currency trading success.
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