Forex Swing Trading Strategies

Have you heard about swing trading? One of its most important features is that it allows you to speculate on the financial markets without having to spend all day in front of the screen.

What is swing trading?

Swing trading is a style of trading mainly used on medium and long-term time horizons. The purpose of this approach is to take advantage of market movements or swings with trades open for several days or weeks.

A swing trading position is open for more than one day, but some may last several weeks. The swing trader usually performs his analysis on a daily chart or even a 4-hour chart. You usually only spend a few minutes each day looking for trading opportunities. The rest of the time, you will let your scenarios evolve on their own. That is the positive point of swing trading.

This trading style is possible on all CFD instruments on stocks, Forex, commodities, and even stock indices.

What is a swing trader?

It has similarities to long-term trend trading, but the market movements are shorter. This is why the swing trader looks for chart patterns of several days and tries to obtain movements or changes in price greater than those usually obtained in daily transactions.

A swing trader can use a combination of technical and fundamental analysis to guide decisions. It doesn’t matter if there is a long-term trend or if the market is mainly range-bound. A swing trader is not going to hold a position long enough for it to count significantly.

Volatility is the key for swing traders. The more volatile the market is and the larger the number of short-term price movements, the more opportunities to open a swing trade.

How to swing trading forex

Remember that swing trading is a style of trading and not a strategy in itself.

The time frame defines this style, and within that, there are countless strategies that we can use in swing trading. As we have commented, it is a style that operates in short to medium-term periods.

The strategies that we are going to look at are not exclusive to swing trading.

Let’s review the two options within the swing trading strategy. One is following the trend, and another one is trading against the trend. 

Counter Trend strategies aim to make a profit when support and resistance levels hold. Trend following strategies looks for the times when support and resistance levels break.

Following the trend

Markets don’t tend to move in a direct route. Even when at the last moment the trend is bullish or bearish, it has staggered movements.

We recognize an uptrend by the market setting higher highs and a downtrend with lower lows.

With this trading method, we look for a bullish movement. We wait for a change in trend. You may be wondering, how long will a pullback last? It’s impossible to know. Instead of speculating, it’s better to seek confirmation that the market has returned to its original trend. After seeing that the trend change has taken place, we enter the market. 

Trading against the trend

With this strategy, we also try to detect the trend in the short term, but now we will benefit from how often that trend tends to break.

The start of a trend could also be followed by a period of retracement before the trend resumes. A swing trader trading against the trend might try to catch the swing in the reversal period. 

To do this, we will try to recognize the break in the trend. This would be when a high is followed by a sequence of failures when trying to break new highs in an uptrend. Then, we position ourselves bearish in anticipation of the change.

When we are against the trend, it is essential to maintain strong discipline if the price moves against you.

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