I started to develop a swing trading strategy after 2 years of trying to day trade the EURUSD. I found trading the longer time frames were not only far more profitable but also less stressful and freed up allot of time to do things I enjoy.
A good swing trading strategy must trade with the longer term trend, all we are looking to do is cut our losses short and let our profits run. It must be simple, anything complicated is only making our trading decisions more difficult.
Lets go through what rules I follow and how I identify a good trade. I trade the 4 hour charts with this swing trading strategy, it works well on this time frame and I suggest you do the same.
First we need to find the trend direction on the daily charts, if price starts in the bottom left and finishes in the top right of your screen then we are in a up trend. If price starts in the top left and finishes in the bottom right then we are in a down trend. If you have trouble show the chart to a child they will get it right every time!
Next we have to go back to the 4 hour chart to find an entry point that gives us good odds of price going in our favour. Look for retraces to the 50% fib level that coincides with good support/resistance levels, I also like to target 00 areas as this is what the larger institutions will be targeting for there orders. Remember only take trades with the trend on the daily chart!
Once you have found a suitable entry point set your order with a 50pip trailing stop loss. Please note that if you trade a currency pair with higher volatility then you will have to increase your stop to suit, 50 pip stop is for the EURUSD which is the main pair I trade.
Once your order is triggered just sit back and watch, do not interfere with the trade, you have a trailing stop to do the work for you. As soon as your position is in profit the trailing stop will move up keeping your stop exactly 50 pips behind and locking in any profit along the way.
Although many new comers looking for a swing trading strategy will laugh at this simple system I can assure you that it works. The more you get a feel for the market the more you will profit with this strategy. Trading forex does not need to be difficult, it is the human physiology that makes it hard for people to see profits disappear. Unfortunately this is part of the business and you must focus on the month to month gains not the day to day gains.
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