High Probability Swing Trading Strategies That Work
Last Updated: July 25, 2020
Swing trading is a popular trading tactic used by forex traders (any type of trader can use it) who are interested in capturing short or medium-term profits on currency pairs.
A swing trader may participate in a trade that lasts days or sometimes even months so that they can make a profit from the price moves as predicted by them.
Swing traders usually satisfy themselves with just a portion of the expected price move that they predicted and then look elsewhere for better opportunities.
A key characteristic of swing trading is the heavy use of technical analysis and other tools such as various indicators to help aid them in their hunt for better trading opportunities.
Fundamental analysis and daily charts are said to be the best friends of a swing trader as they are a huge help in enhancing their market analysis techniques.
These analytical tools are the trading guides of a swing trader that helps him look for accurate entry points, stop loss positions, etc.
However, a strategy is always needed to ensure that all your efforts come to fruition which is why we are going to familiarize you with some of the best forex swing trading strategies used on the market that works.
Understanding Swing Trading
Before we get into the multiple strategies that are used by swing traders on the foreign exchange market, let us try to understand its process more clearly and as well as the reasoning behind it.
Swing trading allows you to exit a trade before it goes bad which ensures that you only get the best out of your positions.
In simple words, you will be able to exit a trade before the market trends flip out of your favor and eat away at your profits.
Forex traders are generally attracted to swing trading as it can last for days, weeks, or even months which means that they don’t have to stay glued to their devices to monitor every shift in the market.
When compared to day trading, swing trading seems to be the one that is less stressful and people who don’t have too much time to invest in their forex trading activities can easily opt for it.
However, not all that glitters is gold. Swing trading also has its disadvantages such as overnight risks and the inability to take advantage of regular trends.
Now that you are familiar with swing trading a little more, let us look at the strategies that are used by its users.
Selling High/Buying Low
The principle of this swing trading strategy is to buy low and sell high when you are in an upward market trend. During a downward market trend, this strategy tells the trader to sell low and buy high.
There is nothing more to it as it is a straightforward strategy.
You can simply use a good technical indicator to save yourself the hassle of identifying each trend on your own and save precious time. The same can be done to identify downward trends.
Riding The Waves
The user of this strategy aims to catch and ride a trend until it dies out. Usually, the user of this strategy captures a single move and holding on to it after its pullback has ended.
The goal is to enter after the pullback has ended and the trend is continuing before it finally dies out.
However, you should keep this in mind that you are only looking to enter those trends which have a pullback that has more potential on the upside trend.
You can use a fixed moving average of 50MA to identify promising uptrends. Wait for a bullish price rejection once you have such a trend in your sights that satisfies the 50MA condition.
Once the bullish price rejection is in sight, move on to the next candle and go for a long position on it while setting your stop loss at an Average True Indicator Reading of 1.
The only thing that you have to do now is to wait for your profits and exit the trade just before it starts to swing high.
Forex Swing Trading Against The Momentum
This is another swing trading strategy in which the trader tries to go against the set momentum of the market. What this means is that the trader goes against the direction of an already established market trend.
This particular strategy requires the user to have some experience in forex trading beforehand as it can be a bit overwhelming for a complete beginner.
While trading against the momentum strategy is in effect, traders look for selling opportunities if the price starts to lose momentum while it's in an upward trend all the while it's reaching an important resistance zone.
Similarly, if the price is a downward trend and the momentum is starting to slow down while reaching an important resistance zone, the trader will look for opportunities to buy.
There might be times when on the market when a trader won’t be able to capture trends that satisfy their needs
The next alternative if such a situation ever arises is to start trading the range rather than wasting time looking for non-existent trends.
In range trading, the maximum value of a forex currency pair is known as the resistance zone while the minimum value of a forex currency pair is known as the support zone.
Swing traders often try their best to sell when the market has reached the support zone and vice versa.
A few things to look out for while the trading range is bullish or bearish signs sometimes combined with a few fake breakouts.
Fake breakouts can pop up for several reasons such as sellers or buyers rejoining the market due to the current price conditions.
To spot a fake breakout, simply look for signs of a price trying to break above the resistance zone or hovering under the support zone.
Swing trading is a pretty useful trading strategy among all sorts of traders. It doesn’t matter if they are trading forex, commodities or even stocks, the merits of swing trading are just too good to ignore.
However, before you start swing trading, you need to draw out a complete strategy first so that you can fully reap the advantages of it.
Once your strategy is set, implement the principles of swing trading into your strategy and aim for the best results.