2Bull Forex Blog

Forex swing trading aims to take profits from movements within the major trends and the good news is - it’s easy to learn, easy to apply, fun and can be very profitable and perfect for novice traders.

Here we are going to show you how to swing trade successfully in 3 simple steps.

Swing trading by its very nature is easier than long term trend following and is perfect for the novice trader.

For the impatient trader you get a lot of trades and you get to know whether your right or wrong quickly, so it’s a lot easier to stay disciplined.

Its fast and its fun, so lets look at how to make profits forex swing trading.

Step 1 – Spot Support and Resistance

You need to use good old trend lines and see areas of support or resistance to trade into and look for at least 3 tests.

Now you have spotted the opportunity, you need to time your entry and correct timing is crucial!

Step 2 - Trade With Price Momentum

Many traders simply like to go short into resistance or long into support as its tested but this is a huge mistake!

You are guessing or relying on hope and the market will not reward you for this – it will kill your equity and wipe you out.

You need to get the odds in your favor and trade with confirmation of price momentum on your side.

You need to wait for a test and then see the market to turn away from support or resistance and THEN trade.

You are trading with price momentum and this will ensure the odds are in your favor.

What indicators should you use?

Try these two: The stochastic and the RSI When you get both in synch and then execute your trading signal.

We don’t have enough time to explain them in detail here – simply check our other articles.

Once you are in the trend and its moving, its time to look to take profits.

Step 3 - Take Profits To Soon

In forex swing trading your profits can disappear quickly, so take your profits early.

This is BEFORE they test the next level of support and resistance - this will enable you to bank a profit in quickly, before the odds turn against you.

Sure, the trade could run on a bit, but chances are if it comes back quickly you will soon be in a loss - so keep the odds on your side by banking early.

Other points

When swing trading place your stop as soon as you enter your trade on stop close basis behind support or resistance and only trade liquid currencies such as:

Euro, British Pound, Japanese Yen, Swiss Franc and Canadian dollar - don’t try it in minor currencies.

A Simple Way To Make Big Profits!

You can use other tools to trade but we have found that trend lines combined with stochastics and the Relative Strength Index, are all you need to have a simple, robust trading method that’s:

Fun, can give plenty of action, put the odds in your favour and make big profits longer term.

Forex charts and technical analysis is a great foundation for a successful forex trading strategy but most novice traders keep making the same mistakes and lose.

If you don’t want to join them, avoid these common forex chart mistakes!

1. Using Useless Indicators

These are indicators based upon flawed logic and are mostly loved by the far out investment community and in the hall of fame we are going to place:

Fibonacci numbers, Elliot wave theory and cycles.

They all come from the markets move to scientific theory brigade.

Really?

Well if markets were scientific there would be no market as we would all know the price in advance. Of course uncertainty is what causes prices to move.

Ignore the above Fibonacci numbers were devised to solve a problem to do with the copulation of rabbits and are nothing to do with forex.

Elliot never made any money trading (despite what his fans say) and cycles well – look at a chart and see if you can spot repetitive ones I cant

2. Using Indicators with NO valid data

Day trading! If you want to use forex charts to make money you need reliable data and in a day or a few hours it’s not – volatility can and does take prices anywhere, so its impossible to win no matter how good your indicators are.

3. Using lagging indicators to lead

Main error here is buying dips to moving averages. Lesson never use a lagging indicator to enter trades you are relying on hope you need to use momentum indicators!

4. Not Using Momentum Indicators

If you don’t know what a momentum indicator is you will never enter with the odds on your side.

If you are using forex charts you need to enter with price momentum on your side and this is why they’re so important.

Two great ones for timing entry on your forex charts are stochastic and Relative strength index – learn about them and use them.

5. Using Too Many Indicators or Rules

In forex trading this causes disaster for any forex trading system.

Less is more when trading, as your forex system will be more robust in the face of brutal market conditions.

Use too many indicators and there are to many elements to break and believe me they will – simple systems work best and always have.

6. The Dangers Of Curve Fitting

Why is it so many back tested systems fail in real time currency trading?
The answer is curve fitting - where the system is bent to fit the data.

One trader I know likened this to shooting at a barn door and then drawing a bulls-eye around everyone one AFTERWARDS!

Many traders cannot get their currency trading system to work so bend the rules a bit to make it- this is curve fitting and its more common than many people think.

Of course no two periods of trading history are exactly the same and that’s why the system fails in real time going forward.

Avoid These Errors At ALL Costs!

These are six common mistakes and there are many more but if you want to win at forex trading then avoid them any one of them can cause you to lose your equity quickly.

This is why forex trading is hard and 95% of traders fail to win.

So how do you do it and make your forex trading strategy a success?

Here are some tips.

Use forex technical analysis as a basis for your forex trading strategy.

Technical analysis and looking at forex charts gives you a distinct edge in that it takes into account both the fundamentals and investor psychology.

Technical analysis simply assumes that all known fundamentals will immediately show up in the market price (and in today’s world of instant communications this is truer than ever before) but it also takes into account human psychology which always pushes prices to far in either direction.

These price spikes are easy to spot on forex charts and repeat ( as human nature is constant ) and can be traded for profit.

If you are trading forex NEVER do the following:

1. Trade fundamental news stories volatility is high and your playing catch up as the news is instantly discounted.

2. Never mix fundamentals and technical analysis as there separate disciplines.

3. While technical analysis is a great way to trade, be aware its an odds game and NOT a science.

Humans are unpredictable and while you can get the odds in your favour nothing is certain.

Ignore people who try and sell you scientific theories or tools such as cycles, Elliot wave or Fibonacci based systems – they don’t work.

If prices could be predicted with scientific accuracy we would all know the price in advance and there would be no market. Its different opinions that cause prices to move.

Trading The Odds For Big Profits

So you are playing the odds and with a simple forex trading system based upon technical analysis you can make a lot of money. One final point:

If trading via forex technical analysis and using forex charts, keep in mind you need to use valid data – this means trading the longer term trends.

Avoid day trading as the time period is to short and the data is meaningless and you will lose.

If you understand the above points you will know how and why prices move and be able to trade them for profit and avoid the mistakes of the losing majority.

How to devise a forex trading system for profit based upon technical analysis will be covered in part 2 of this article series.