Swing trading is a great way to trade, especially when you do not have time to stare at charts all day. But mastering swing trading strategies do take some serious work.
In this forex video, I will go through 25 tips that will help you master swing trading. Whether you have just started trading or have been trading for some time, these tips will transform your trading if you apply them diligently.
Tip 1: The great trades are obvious.
Here’s the thing, if you have to stare at the charts to find a trade, then there isn’t a trade. The most obvious trades are those that usually work and those are the kind of trades that you want to focus your attention on.
The best trades jump out at you and create a sense of urgency that you MUST act.
Tip 2: Trends are relative to their timeframes.
You might see a downtrend in the H4 timeframe and an uptrend in the daily timeframe. Trends are relative and at any given time, the trend can be both bullish and bearish, depending on the timeframe. Never assume or expect all timeframes to align.
Tip 3: Historical price action is important.
The market remembers what happened previously at a price level as market participants pay close attention to what price previously did. If EURUSD was previously supported at 1.30, chances are it will happen again.
Tip 4: It is okay to be uncomfortable.
Often, the setup that scares you the most is often the one that you need to trade. Certainly, the best way to enter a good trade is to buy low, and that only happens when the price falls. Buying when there is a sharp drop in prices is not the most comfortable thing, but it is surely the most profitable thing you can do.
Tip 5: Buy at support and sell at resistance.
When price hits a level, there are only two things that it can do; break the level or bounce off the level. This sounds obvious but trading doesn’t need to be that complex.
Tip 6: Trade the first pullback after a new high or low.
Trends will usually consolidate near the last support/resistance and form a pre-breakout structure before breaking out. You want to trade with the crowd who missed the breakout trade.
Breakouts often retest the prior support and resistance before resuming its momentum. Such occurrences offer a good chance for you to get into an existing trend with a well-defined level to base your analysis on.
Tip 7: Don’t follow others blindly
It is okay to listen to a person’s opinion and follow it, provided that you agree with the opinion. After all, it is your money at stake and you are responsible for your own decisions.
Do your analysis and think for yourself, this way, you can learn a lesson if you are wrong.
Tip 8: Consider the element of time when trading
A concept overlooked by most traders is that time is money. Allocating a percentage of your equity to a currency pair that isn’t moving will deprive you of the opportunity to allocate that portion of the money to another currency pair that might make you good profits. Always consider the opportunity cost and select the best opportunities.
Tip 9: Avoid trading into the open of a trading session
When it comes to forex, there are three major trading sessions; Asian, European and US trading sessions. Avoid taking positions as the market transition from one trading session into the next.
As a new trading session starts, traders act on the overnight news flow and price action will often not be reliable. As much as possible, avoid trading into the open of a trading session and give some time for the market to settle down.
Tip 10: Price consolidates the majority of the time.
Markets don’t trend that often. And even when they do trend, it only lasts a short period. Price is going to remain in consolidation for the majority of the time. So be prepared for months of choppiness and periods where your strategy might not perform well as price stays stagnant.
Tip 11: Look for confluence
When swing trading, always look for confluence. Confluence occurs when several indicators or tools point to the same price level or trade signal. For example, a moving average that coincides with a descending trendline is a great confluence of a strong resistance level.
Another example would be when the market structure falls in line with a Fibonacci retracement level. When these tools or factors coincide, they form stronger support and resistance levels which has a higher probability of holding.
Tip 12: A profitable strategy on its own isn’t enough.
Amateurs focus on strategy while professionals focus on execution. Professionals understand that it is impossible to make money even if you have a good strategy if you can’t execute your strategy flawlessly and manage risk.
Understand that a profitable strategy must be combined with good execution and proper risk management. Learn what a good setup looks like and focus on executing that setup with the appropriate position size.
Tip 13: Always focus on managing your risk.
Professional traders always focus on managing their downside instead of obsessing over how much they will make. It is often said that if you focus on taking care of the downside, the upside will take care of itself.
Stop thinking about gains but instead focus on controlling your risk.
Tip 14: Big losses always come from mismanaging risk
If you size your positions properly and apply proper risk management, no single trade should result in a big loss. When you suffer a big loss, it always has to do with you mismanaging your risk.
Tip 15: Apply the 200-day moving average
When it comes to swing trading, you are primarily interested in the medium to long-term picture. A simple way to determine whether you should be bullish or bearish is to use the 200-day moving average. If price is currently above it, then you should be bullish. Conversely, if price is below it, then you should be bearish.
Tip 16: Pay attention to volatility.
You want to enter a position as volatility is expanding. This way, you have a chance to catch a big move as the market starts to trend. You could use the Bollinger band to help determine this.
Tip 17: The more obvious the pattern, the less likely it is going to work.
The harsh truth about trading is that even the “perfect” setup can fail. This is especially so for patterns that are obvious. Institutional traders know how retail traders perceive these patterns and hence make use of these patterns to build their positions.
See a double bottom over here?? Well, in this example, watch how institutional traders were triggering stop losses while accumulating their position here.
Tip 18: Changes in market conditions usually take some time.
Trends rarely just stop and do a 360 degree reversal. Reversals build slowly as traders are all conditioned to trade with the trend. It usually takes a period of distribution before the market starts to reverse.
Tip 19: Always have a stop loss when trading
There is no certainty in trading and any trade has the potential to be a loser, no matter how perfect the setup looks. Always remember that we are dealing with probabilities and so it is important that you have a stop loss in place to protect your account.
Tip 20: Don’t count your profits until they are booked
A common mistake made by amateur traders is that they get all excited and think about the things they could buy with the unrealized profits sitting in their account.
Except that these unrealized profits never materialize into actual profits as trader gives back majority of the profit when the market pulls back. Never count a trade a winner until the trade is closed.
Tip 21: Trading is not a job where you get paid for the hour or based on how hard you work.
The market only pays you when you are right. It doesn’t care how long you waited for the setup or how long you took to analyze the charts. Seeing trading as a job will cause you to force trades as you feel compelled to work for your profits.
Tip 22: Never revenge trade.
Each new position should be taken based on its own merits. The outcome of the previous trades should not affect your decision in any way. When dealing with your losses, stay composed and if necessary, take some time off the market. Revenge trading is simply gambling and that’s not the right way to approach the markets.
Tip 23: Understand that each trading strategy has it pros and cons.
Recognize that there is no holy grail, no secret trading formula that can win all the time. What you need is a strategy that places the odds in your favor. Combined with good risk management and flawless execution, that’s how professional traders make money.
Tip 24: Focus on mastering yourself.
Learning to read charts and price action is relatively easy, you could pick that up within a month or so. But most traders fail not due to a lack of knowledge, they fail due to a lack of discipline. The lack of discipline to apply proper risk management, the lack of discipline to stick to their trading strategy and so on.
Discipline is one of the hardest things to master and is also the most important element in trading. You want to focus more on mastering your emotions and discipline.
And lastly, we have tip 25 which is to not trade for excitement. Successful trading is actually boring. You patiently wait for each setup then you execute the same setup day in and day out. And while you are waiting for the trade to move, you wait yet again.
You are just sitting there and allowing the market to come to you rather than chasing after the market.
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