By: Monica Hendrix
Currency swing trading is easy to learn and can be very profitable. Here we will look at how to put together a currency swing trading system which can help you build big consistent gains, even if you have never traded before.
Why is swing trading so good for novice currency traders?
The answer is - it requires less discipline than long term trend following. You get lots of trades and profits and losses are banked quickly; this suits the trader who isn't patient or lacks the discipline to sit on trades for a long time.
What exactly is currency swing trading?
Swing trading takes advantage of over bought and oversold levels within the major trends and you swing trade between these levels of support and resistance. Trades typically last a few days to a week.
Let's now look at this great way of trading and how to incorporate it in your forex trading strategy.
How to swing trade correctly
With swing trading you need to look at price momentum and determine if support or resistance levels will hold. For example, if a price comes to support you wait to see if it will hold and then take a long position and bank it before it hits resistance.
You have to determine if levels will hold and here it is important to determine if price momentum is turning up above support - this is when you want to execute your trading signal. For this you need to use some momentum oscillators.
If you don't know what they are they are leading indicators that simply tell you the velocity and momentum of price.
Great Swing Trading IndicatorsTwo great ones for swing traders are the Relative Strength Index (RSI) and the stochastic indicator. We use these in our swing trading strategy to execute our trading signals and it works very well. There both visual indicators and you can spot set ups instantly - there explained more fully in our other articles so look them up.
Stop Levels
When you execute a trading signal you simply put the stop behind the level you're bouncing off and then take your profit as you come into resistance for your trade.
Profit Taking
In swing trading your aim is not to hang on to the trade and trail a stop but to have a profit target and bank it - hang on to long in swing trading and your profit will disappear.
Does the above sound simple? It is - but don't let that deceive you it works. I have been using a simple currency trading system based upon the above for 20 years and made a lot of money with it and you can to.
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