a Swing Strategy in the Forex Market
Like any other investment market, the Forex market lends
itself to a number of different trading strategies –
day trading, scalping, long-term trading, etc. Which strategy
chosen is really up to the individual trader and style of
investment – the quick, fast trades; the longer, open
positions; or somewhere in between. If you like compromise,
you might opt for the “somewhere in between”
model, or swing trading.
How Does Swing Trading Work?
Think of swing trading like a big swing that rotates or
moves back and forth between two positions. Positions are
held longer than a few minutes or an hour, like in day trading
(scalping is the extreme version where trades are made every
few seconds), but shorter than the weeks or months that’s
common in long-term trading.
So how do you know when to make that perfect trade –
not too early or not too late? You may not know that optimum
time, but you can estimate as best as possible based on
1. Use fundamental analysis – This
technique utilizes macroeconomic data to make trade decisions.
It monitors economic changes based on such factors as changing
political climates, Federal Reserve meetings, the housing
market, or even disruptive weather changes. Staying current
with international news is vital in this type of trading
2. Don’t forget about technical analysis
– Fundamental analysis is important, but
don’t negate the significance of technical analysis.
With this type of analysis, investors closely monitor currency
rate fluctuations through the use of charts, past and present
currency quotes, and other market data, and then base their
decision on overall movements or trends in the market. One
of the more common technical analysis tools to measure such
trends is Elliot Wave analysis. It postulates that market
trends come and go in waves, due to basic human nature.
3. Know your limits – Determine
how much risk you are willing to take. If a currency starts
to fall in only a few hours, are you willing to hold out
a day or so before you sell and take that gamble that the
“sell price” will go up? Perhaps you’re
more interested in minimizing any potential losses? Only
you can make that decision based upon your overall risk
strategies. A good rule of thumb, however, is to enter a
trade only when the risk can bring a reward of at least
An automated Forex trading system platform provides
traders an online environment to place orders 24/7, from
the comfort of their home.