Optimize Your Forex Return with Swing Trading

10/06/2015 9:00 am EST

Focus: FOREX

For the benefit of all new to—or even just considering—trading forex, FX Binary Point,at FXTimes.com, outlines how indentifying the price trend with the help of swing analysis is one of the most widely used and successful forex strategies and why time frame plays such a vital role.

Swing trading or identifying the price trend with the help of swing analysis is one of the most widely used and successful forex strategies. It may be called a price action strategy because it doesn’t involve the use of lagging indicators.

How to Identify Trend with Swing Trading Strategy?

The price moves in the form of waves, thus leaving higher highs, higher lows, lower highs, and lower lows on the chart as demonstrated below;

chart
Click to Enlarge

Now, in order to identify the ongoing trend, all you need is to observe these highs and lows very carefully. If the current wave forms a higher high and higher low as compared to the previous wave then we say the ongoing trend is bullish.

Similarly, if the price forms a lower low and lower high as compared to the preceding wave then we say the current trend is bearish. Swings provide the most accurate direction about the existing trend.

Which Time Frame Is Suitable?

Well, it depends on your forex strategy. The swing trading strategy is suitable for any time frame. If you are a day trader then you may conduct swing analysis on hourly or four-hour time frame, if you are a long-term trader then you can do it on daily or weekly time frames. Higher the time frame, higher will be the reliability of the trend signal.

How to Trade the Trend?

If the ongoing trend is bullish then you should consider only buy (long) trades or wait for a reversal candle to emerge and vice versa. Also, the trades should not be based solely on trend analysis, the entry should be around key support/resistance levels. In our next topics, we are going to discuss how to calculate support and resistance levels.

By FX Binary Point at FXTimes.com

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