Currency Swing Trading - 3 Steps To Long Term Profits

Currency swing trading is a method that can generate big profits and has the advantage of being easy to learn and easy to apply and is ideal for noivice traders. Lets look at currency swing trading in more detail.

Currency Swing Trading Defined

Currency swing trading aims to take advantage of shorter term moves, within the primary trend. These moves typically last between a few days to around a week.

If you want to incorporate swing trading in your forex trading strategy, then use these 3 simple steps to enjoy currency trading success.

1. Define Support and Resistance Areas

If you want to swing trading in forex then a knowledge of support and resistance is a must and the more tests the better. Furthermore, tests in different time frames and wide apart in terms of time, add to the validity the levels.

Once you have defined support and resistance, its time to look to execute your trading signal.

2. Confirm With Momentum Indicators

You should not just enter your trading signal and hope support and resistance levels hold - wait and watch price momentum to give you proof that they have held.

For this, you need to watch a test of the level and then for price momentum turn the other way. You now have proof the level has held and can enter the trade.

When swing trading in currencies, there are lots of momentum indicators you can use but two of the best are:

The stochastic and Relative Strength Index (RSI). If you are not familiar with momentum oscillators, then now is the time to learn.

Once you have the signal from a change in price momentum, you can enter your currency trade.

Now we need to look at stop losses and targets.

3. Stops and Targets

If you are swing trading in forex markets then stop levels are obvious – just behind support or resistance.

You should also always work with a target.

This should be just in front of the next level of support or resistance.

When price reaches the target level - of course it can go on in the direction you anticipated but the odds of a recoil back against you increase.

So take your profits early and keep the odds in your favour.

Other points to keep in mind when swing trading are:

Don’t forget to buy or sell breakouts.

For example, if you are trading in to resistance at new market highs consider a stop reverse which would immediately put you long to take advantage of the breakout.

It’s a fact that most major moves take place from new market highs not market lows so by going with the breakout you are taking advantage of a high odds trading scenario.

Don’t be afraid to reverse your view and go with price momentum.

If you are swing trading in currencies – not all currencies are equal, in terms of profit potential.

Because you are looking for smaller profits and trading more frequently, the cost of doing business adds up.

You need liquidity and tight spreads, so stick with the major currencies and dollar – yen and dollar euro are ideal.

Swing Trading Keep it Simple

If you are swing trading in currencies keep it simple!

Support and resistance and a few momentum indicators are all you need. Many traders make the mistake of using complicated currency trading systems.

A currency trading system that is to complicated will have to many elements, to break and be less successful.

For most currency traders, swing trading is easier to apply and requires less discipline than long term trend following. There are also plenty of trades to look at and profits and losses are taken quickly, making it exciting and engaging.

If you have not considered swing trading in currency as part of your currency trading system - then you should.

Its easy to learn, easy to apply and best of all its got great profit potential and can lead you to long term currency trading success.

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