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Swing trading Forex is a type of short-term market speculation where positions are held for longer than a single day.
It has relationships to long-term trend following. But you instead are looking for much shorter market moves.
Also, swing trading is a longer term trading style. It requires patience to hold your trades for several days at a time.
It is excellent for those who can’t monitor their charts throughout the day. For those who can dedicate several hours examining the market every night.
The swing trader is actually looking for multi-day chart patterns.
To achieve bigger price moves or swings than you would typically get from a day trade.
It is possible to start forex swing trading with $1,000 or less. Moreover, with the right plan, it is possible to start making a small income or to grow the account.
The point is that the forex market gives precise control over positions size and risk.
So, even a small account can be traded in the same way a experts trade a large account.
But you have to know some steps that guide you through the process of growing any size forex account.
Yes, you can start with less, but if you want a decent income, you should start with at least $500.
The problem with start with less than $500 is that you’ll be limited on the trades you can take.
On the other hand, $1,000 gives you a bit more space. So you should be equipped to take most of the swing trades.
This is apparently best suited for those who have enough free time to stay up-to-date with what is going on in the global economies.
Swing trading tries to recognize “swings” inside a medium-term trend and enter only when there are big chances of winning.
In general, swing trading is taking trades which last for a day to a couple of weeks.
When you swing trade the point is to spend about 20 minutes each night finding trade set-ups. This happens after the US market close but before the London market open.
You can set your entries, stop losses and targets and go to sleep.
The advantage of swing trading Forex
The advantage is, the risk is managed and the targets and stop losses are set. So there’s no need to continually monitor the trades.
When you set targets longer than stop losses, the math will be done and increase your account.
Even if you gain only 40% of your trades you will be profitable using this method.
The trades last much longer than one day. So larger stop losses are needed to overcome volatility. A forex trader must adjust that to their own money management plan.
There can be many changes in the price during the shorter time frames.
Hence, you will experience trades go against you during the holding time.
It is essential that you are able to stay cool during these times and trust in your analysis.
Forex Swing Trading and Brokers
Before getting into swing trading, it is recommended to have the right type of forex account.
Your account must allow you to trade micro lots.
Why is this necessary?
A micro account allows you to trade in 0.01 lots. That means each pip is worth $0.10 for example in pair EUR/USD.
So, each pip is worth $1.
A standard account expects trading full lots, where each pip is worth $10.
The good thing with a broker that lets you trade micro lots is that you can really adjust your position. Assume you increase your account to $10,000. You’ll still want to be able to trade micro lots. With micro lots, you can adjust your position so you’re risking 1% of your account.
On a $10,000 account, with risk at 1%, you can lose up to$100 per trade. With a 70 pip stop loss, you can take 14 micro lots which give you a risk of $98.
Can you see the difference? Nice!
Trade micro lots and trade with a broker that lets you trade in micro lot profits regardless of account size.
Try to find a broker with small commissions. The spreads could be less than a pip in most pairs. This is perfect for swing trading Forex.
The bottom line
Swing trading is more of a style, not a strategy. The time frame defines this style. There are countless strategies you can use to swing trade. Swing trading is a style that moves over short to medium time frames. It occupies the very short time frames of day trading and the longer time frames of position trading.
The support and resistance are the key concepts behind this style.
Swing trading Forex strategy gives you the choice of following the trend. Also to trade counter to the trend.
If you don’t mind holding your trades for several days or you don’t mind having large stop losses.
You are stable and swing trading Forex is for you.
Don’t waste your money!