Swing trading in forex

2 Jan

Forex swing trading is a form of range trading. The swing trader attempts to capitalize on periods of market indecision, and aims to make use of support and resistance lines, channels and price patterns such as tops and bottoms in formulating his strategy.

This style offers greater odds of success for beginners as it doesn’t limit the trader’s attention to a couple of hours (unlike day trading), and because the swing trader doesn’t need to invest a lot of time trying to identify the perfect price for entry and exit. As long as the price remains within the range identified, and the periodic reversal patterns persist, the trade will return a profit. When the range breaks, the swing trader has no illusions about what he must do. His period of bounty is over, he can enjoy his profit and rest as he awaits the next suitable period.

 

Swing High

Swing high

A price bar is considered a swing high when the high of that bar is higher than the high of a certain number of bars before and after it. The Strength input specifies the required number of lower highs that need to be on either side of the swing high before it will be plotted on the chart.

Swing Low

Swing low

A price bar is considered a swing low when the low of that bar is lower than the low of a certain number of bars before and after it. The Strength input specifies the required number of higher lows on either side of the swing low.

Usage

Swing high and swing low bars can be used to calculate trendlines, support and resistance lines, and pivot points.

Needless to say, the main requisite for successful swing trading, as with trend following in general, is the correct identification of the range or trend. In doing so, the employment of both fundamental and technical analysis perhaps offers the greatest rewards, but the trader will usually choose the method that he favors the most. In either case, gaining a good understanding of the type of market experienced for a particular currency pair and formulating a defined strategy on that basis is the best course. As previously mentioned, the swing trader does not need to be precise about the entry and exit points; all he needs to do is catch the main movement, taking profit as soon as the price action runs out of speed at a point close the limits of the range identified.

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