Swing Trading Strategy Explained

February 28, 2010 by Kelvin
Filed under Forex Tutorial

Forex swing trading is one of my favourite trading method as it happens so frequently which gives all traders a lot of opportunity to trade it.

However there are times where the swings are more vigorous and this is when you can make more money from. Typically the forex market moves in waves and these waves are what is known as swings. You may be thinking that there are so many swings in a chart and is it possible to trade them all.

The answer is NO. If you take a close look at the swings, you will find that most of them do not move by a lot of pips. Therefore today I will be revealing to you the time that I often trade forex swing and it is also the time where there are bigger movement in price which makes it more profitable to trade.

small swing

big swing

First of all, let me go through the definition of swings for those of you who are new in this field. Basically a swing is made up of a V or N shape and it is actually formed by a reversal or retracement in price movement.

V-Shaped Swing

N-Shaped Swing

The best time to trade forex swing is during London Open and New York Open as these are the times that have the most violent swing.

Forex Indicators Required To Trade Forex Swing:

MACD (Moving Average Convergence Divergence)
Oscillator: Stochastic/RSI
Parabolic SAR

Here are How You Can Trade Forex Swing:

1) Time To Do Technical Analysis: As the swing often occurs at London Open or New York Open, you should be doing your technical analysis 1 hour before the opening time. This can gives you ample time to analyze the time and figure out all the major supports and resistances.

2) Trend Line: To trade forex swing, you should be waiting for a trend line break to confirm the reversal or retracement of the price which makes up the swing. Take note that you should never enter your trade before a trend line break occur as you may be stopped out of your position if the price did not break the line but end up being repel by it.

3) Verify The Break: There are times where you will experience the price breaking through the trend line and move back in within the next candle and this is what traders call “Fake out” and this can usually be minimised with the help of MACD.

All you have to do when you see the price breaking out of the trend line, you should than check the MACD histogram to see if it flips to the other side. If it did not, there is a high chance that you are seeing a fake out in action.

4) Check Your Oscillator: This is the last step to check before you enter your trade. If you are looking to go LONG, you should check the oscillator to see if there are oversold and if you are looking to go SHORT, you should see if the oscillator is overbought. This can gives you additional chance of having a winning trade.

Real Swing

The above are how I trade forex swing and you can try them out to see if it works for you as well.

You can check out my other posts that show you how I trade forex breakout strategy as well as my forex scalping system.

In case you are interested to learn more about the forex swing strategy, this is one place you can learn how to trade the swing strategy effectively. In fact, I have purchased the course before and find it very effective. Click here to find out more

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Tags: forex swing, forex swing explained, forex swing strategy, forex swing trading

Comments

8 Responses to “Forex Swing Trading Strategy Explained”

Mohamed mukrin says:
April 9, 2011 at 3:05 pm
What about the parameters value to be set in macd histogram for 15 minutes to confirm the swing..
Reply
- Kelvin says:
  April 25, 2011 at 9:50 pm
  Hi Mohamed Mukrin
  As for the MACD, you just need the default setting of 12, 26, 9
  Reply
Rockdrop says:
July 27, 2010 at 11:12 am
Another interesting article. Your right about the large swings when New York or London trading times open.
Thanks and more power!
RockDrop
P.S. Rock drop is my favorite swing
Reply
- Kelvin says:
  July 29, 2010 at 12:24 pm
  Hi rock drop
  Thks for coming forward to share your view. To me, these are the best time to trade.
  Reply
chris says:
June 8, 2010 at 8:06 am
How do i set my “stop loss” and “Take profit” targets using this swing trading strategy.
As i work full time, i need a strategy that enables me to be able to place my trades without constantly watching the charts. Would i need to incorporate the fibonacci retracement and extension?
Reply
- Kelvin says:
  June 9, 2010 at 1:54 am
  Hi Chris
  For the setting of the stop loss, I will suggest you to place a stop loss of certain pips above the point where the price break below the trend line or at the most recent swing high whichever is lower. Depending on the volatility of the currency pair you are trading, the amount will vary. If you are trading the EURUSD which is not that volatile, you can simply place a stop loss of 25 pips above or below the point of breakout and if you are trading something that is more volatile like the GBPJPY, you need a stop loss of about 35 to 45 pips.
  As for the target profit, I usually take my profit at the next pivot level. Let’s say that I enter a short trade below the pivot point, I will take profit at the M2 or S1 level.
  Reply
ed says:

1.Set up Stochastic ( Nak tau Market dah Over sold atau Over Bought)

2.Set up MACD ( nak tau bila ENTER)

April 13, 2010 by Kelvin
Filed under Forex Tutorial

25 Comments

If you have read my previous post showing you how to plot the forex Fibonacci indicator on your chart, you will understand the power of the 0.382, 0.500 and the 0.618 Fibonacci retracement level. These retracement levels are areas where you will the price being repelled by them. What makes Fibonacci trading such a popular system is because of its ability to predict the subsequent movement of the price which is through its extension.

Here is how the extension works:

1) When you see the price retracing to the 0.618 level and then being repelled by it, there is a high chance that the price will extend itself to the 1.618 level.

2) When you see the price retracing itself to the 0.500 level and then being repelled by it, there is a high probability that you will see the price extends to the 1.500 level or even 1.618.

3) If you see the price retracing itself to the 0.382 level and then repelled by it, you will most probably see the price extend itself to the 1.272 level and then move to the 1.382 level.

With your understanding of the extension, you will now be able to understand how this forex Fibonacci trading system works.

First of all, you need to setup either the Stochastic or RSI to help to identify whether the market is oversold or overbought.

Next, you need to setup a MACD indicator to help you identify the right time for entry.

Once you got this 2 indicators setup, you will need to draw Fibonacci whenever you see a swing high and a swing low. All you need to do is to wait for the price to retrace back to either one of the 3 levels and then check your indicators for signal. If the price did not retrace but continue to move higher or lower, you just have to remove your Fibonacci and then redraw them again with the new swing highs or swing lows.

Whenever you see the price retracing near a level, you should check your indicators for the following

1) If you are in an uptrend and you see the price retracing back to the 0.500 level, you should check your Stochastic indicator to see if the market is oversold or not. If it is indeed oversold, you should then move on to see your MACD indicator and wait for the histogram to flip over to the upside again before you enter your trade.

After you have entered a trade, your exit strategy is equally important. You will usually exit your trade 10 pips before the expected extension and you should always place a stop loss around 20 to 30 pips below the level of retracement.

Fibonacci Trading Example 1

2) If you are in a downtrend, the conditions that are stated above shall be reversed.

Fibonacci Trading Example 2

If your Fibonacci retracement levels coincide with a major support or resistance level, this will give you more strength in that level and thus increase your chance of winning.

Do not start to trade immediately with this forex Fibonacci strategy. You should always try any new strategy out on your demo account and then move it to live only when you are able to trade profitable with it consistently.

I have received emails from readers of this blog asking me for recommendation of good courses on Fibonacci, in fact I have purchased one course that teaches Fibonacci strategy before and find it pretty useful for my trading. You can find out more about the course from the link below

Sunday, July 10, 2011