Forex Trading Techniques

Forex swing trading is a method of trading where currencies are held for more than a day and traded on basis of the weekly or monthly oscillations between the highest value and the lowest. Basically, the trading period is longer than that of day trading and shorter than in trend trading. In swing trading, traders can hold the stock for a period ranging between two days and two or three weeks at most.

Beginners will find this trading style ideal, as it provides them with several opportunities to trade in a win, without the pressure of day trading or the unpredictability of trend trading. Advanced traders too can make good profit since they have more or less mastered the strategy and can make accurate judgments.

Not all stocks are suitable for swing trading. Large cap stocks are the best type of stocks to use for swing trading – major currencies in forex trading. These are actively traded and will move in both directions in a few days or weeks.

Swing trading yields best results when the market is in between bear and bull extremes. Here, the stock will change direction within a relatively short time and will not remain in one direction for long. The swing trader has more chances of making some profit in a market where the indexes move up and down in a relatively short time. The trader relies on the channel movement to determine his chances of gaining. By the time the trader calls in their trade, the indexes are more or less on the same level they were at but the trader has captured some high and low moments in between on which to base their trade.

Swing forex trading uses the baseline to gauge whether to go long or short. Since forex exchange is highly liquid, they tend to oscillate far above and below the baseline. The baseline value of any index is indicated on an exponential moving average (EMA) chart. To make a correct estimate, the swing trade will wait for the index to hit the baseline and watch for the direction it picks from there, and then make their move based on that. The key is to go short when the index is above the EMA if the downward trend is expected to be longer. If it goes below the EMA, go long and wait for the upward trend.

The real challenge for the swing trader is choosing when to exit, although for the seasoned swing trader this will be easy. It is only hard the first few times as one learns. Rather than wait for a precise spot at which to exit, forex swing traders exit at a point close to the upper or lower channel. Waiting for an exact spot can lead to the trader missing a big opportunity to gain profit. This is the general exit strategy for weaker markets. For strong markets, the exact timing is different. Swing traders can wait for the index to hit the channel line before calling in their profit. For more information on effective trading techniques be sure to visit LucrorFX today!

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