Forex Trading: A Simple but Effective Daily Swing Strategy with Examples

The Forex (Currency) market is huge. Trillions (literally) are traded every day in the forex currency markets. It’s a highly liquid (always buyable and sellable) market enabling traders to make consistent gains when following a sound trading strategy.

In the broadest terms, there are two main ways to implement a forex trading strategy: –

"Done For You" (DFY) is basically Copy Trading, which also sometimes called 'Social Trading'. The alternative is to dive in and learn trading strategies yourself, but it will take longer to get up and running than a DFY strategy . The advantage of DIY trading is, of course, that there won’t be any of the associated fees you will pay with DFY trading.

There is no better way to learn than with an example trade so that’s what we are going to do below. The trade below will take you step by step through a ‘pin-bar reversal‘ trade which is a decent swing trading strategy. 

So, the idea with this strategy is that you can do it alongside a day job by trading 10 to 15 minutes in the evenings. You spot the 'trade setup',  set the trade and forget about it. It either hits your target or your 'stop loss'. It’s a ‘daily chart’ strategy, so there is no need to stay glued to a screen all day. The Daily timeframe is more reliable than the lower timeframes such as the hourly chart.

Why Trade the Daily Chart?

The higher the timefame, the stronger the trend. Trends on the daily chart hold a lot more strength and probability than the lower timeframes. The daily chart Is resistant to most forms of intraday noise and inexplicable price spikes.

Trading the daily chart in such a hands off manner is a far more peaceful and relaxing style, where you do not have to constantly tend to your trades. Temptation to place trades out of boredom, anger and frustration is seriously reduced you only look for opportunities and manage open positions once a day, the temptation to trade for trades sake is greatly diminished.

Before you start trading Forex you need to understand the basics. You need to know what the basic terminology is and what these words and concepts mean.

What are PIPs

Trade Size & Risk:Reward

This is best illustrated with colour in the image below:-


example below... target level of the short trade is just below the previous swing low where it says "Target@ 20541"...

Key horizontal levels can be used in markets that are not in a clear trend up or down. These are somethimes called "Power Zones as price action oscilates between the lower 'support' line and the upper 'resistance' line

You want to target a reward of at least 2x (or 2:1) to make a trade worth your while…

I recommend trading the Daily and Weekly charts without spending too much time on it so that you can still do this as a supplement to your day-job


Trade Risk Management

THE GOLDEN RULE: Never risk more than 1% of your trading account

1% (trading account size)


the number of PIP’s we could lose if the trade goes against us


The Stake Size. The Max trade per PIP we can afford to bet on the trade.

For simplicity, an example risk management calculation for a trade on a £100 account with a 20 PIP stop loss would be as follows:-

1% (trading account size) = £1


the estimated number of PIP’s we could lose if the trade goes against us (20 PIPS)


5 pence. The Stake Size.

This is the Max trade per PIP we can afford to bet on the trade.

Risk & Reward

We are looking for a target of at least 2:1 Reward to risk in order to place a trade. There must be the potential of a greater size of the reward compared to the size of the risk, each time we place a trade. Clearly, the higher the better. A sweet spot might be something like 5:1.

Reward to Risk Ratio Calculation:-

Entry price – Target Price (Reward)


Entry price – Stop Loss Price (Risk)

So, for any trade, you take the stake size calculated during risk management and plug it into the Reward to Risk Ratio Calculation. If this is 2:1 or more then the trade can be placed if the criteria below are met.

Swing Trading Strategy

Most strategies out there are either a ‘bounce‘ strategy or a ‘break out‘ strategy. We will concentrate on trading the bounce as it has been shown to have a higher probability, and has a higher risk-reward return than the breakout.

Price action breaks out about 30% of the time but bounces 70% of the time.

Even a dogmatic disciplined approach to trading the bounce can on the balance of probabilities pay off better than second-guessing a breakout. So we Trade the Bounce.

We trade longer-term trades on the daily charts with consistently high reward to risk trades. This frees up time compared to intra-day traders who sit in front of a screen all day waiting for shorter-term trades.

Trade in the direction of the trend

If the trend is up we trade long. If the trend is down we trade short. This gives us higher probability trades...


In an upward trend, the 20-day Moving Average (MA) is above the 50-day MA which in turn is above the 200-day MA. The reverse must be true to identify a downward trend…

Trade the Trend: If you identify a series of higher highs AND higher lows it is usually an ‘upward trend’. We look to trade the ‘bounce’ on the ‘higher lows’. In an upward trend, ‘buy the dips (trade 'long' the dips). In an upward trend, we do NOT trade the start of the pullbacks from the trend, just the bottom of the pullbacks when they switch back to the upward trend.


A downward trend is the opposite or converse of the upward trend where we look to make sell trades on the successively lower highs of the downtrend. In a downward trend we ‘sell the rally‘. Once again we only trade with the direction of the momentum so we only look to trade the downward phase from a ‘lower high‘ to the next ‘lower low‘.

We want to trade the resumption of the trend as indentified above but with the following confirmations in addition to the signal bar (Pin Bar, Engulfing bar etc): -

The MA check above could be the 20 day MA, 50, 100 or higher.

Example trade (GBPEUR) - downtrend

Not only do we have a Fibonacci retracement to the 0.618 level from the previous swing high to the current swing low, we have a Fibonacci cluster from the second previous swing high to the current swing low of 0.5. Both of these are classic retracement levels where reversion to the trend is often seen.

To add to our case to make the trade we have a head and shoulders bearish topping pattern on the storter time frame on the hourly chart 

The case summary to make this trade...

Example trade (EURAUD) - uptrend

We have multiple touch-points on the vertical trendline and on the 20 day Moving Average line 

We have 0.618 Fibonacci retracement to the trendline...

Keep you eyes peeled for a 'Fibonacci cluster' which adds more weight to the case to make the trade. The previous swing low to the current swing high below shows a touch point at the 0.618 retracement level. The previous previous swing low to the current swing high, shows a touch point at the 0.382 retracement level. 

On the hourly chart we have an "inverse head and shoulders" pattern which is another sign the reversion to trend upwards is likely. So we have multiple reasons to place this trade 

Trade Example : Downtrend GBPCHF

Swing Trade price action is seen across all markets from currencies to commodities and stocks...

FTSE 100 Uptrend Trade Example

Trade Example 1: Pin Bar Reversal

A ‘Sell’ Trade Example (USD dollar / CAD – Canadian dollar)

The image below is the example trade that we will use to illustrate the entire trade with calculations for trade size, stop loss etc. If you are new, don’t worry about these terms, they will be clearly shown in the example trade

(1) Identify the trend

Firstly, identify the overall trend on the currency pair. As explained above, if the 50-day Moving Average (the red line in the diagram below) is below the 200-day Moving Average (the green line in the diagram below) we have a downtrend, which also reveals on the chart as a series of lower ‘highs’ and lower ‘lows’:-

You can also draw in other moving averages such as 20 day or 100 day but the 200 day and 50 day moving averages (MA) are the best two MAs for identifying the trend on the daily charts. The 20 day MA can add weight to the trend confirmation:-


(2) Draw The Trendlines

Take the ‘straight line’ tool on the daily chart and draw diagonal trendlines onto the chart joining recent highs and lows over the period of two or more months. Draw them from the daily trade ranges, not from the bars themselves, but not all highs/lows will hit the trendlines but most will be there or thereabouts. (I have seen some traders draw from the top of the open/close bars so there it’s not a ‘must’ to draw from the very top/bottom of the trading ranges for the peaks and troughs. Somewhere in between the two should be fine.)

In our trade example diagram above (USD/CAD), the lower highs and lower lows made over the period of a few months along with the 200 then 100 then 50 day MA confirms our downward trend.

(2) Identify the ‘Rally’ (for a downward trend) / or the ‘Dip’ ( for an updward trend)

In a downward trend scenario, we are looking to sell the rallies in anticipation of the rally losing momentum and continuing the downward trend, so, we are looking for AT LEAST three daily buyer bars (green bars, or blue bars in the image above, that closed higher on the day than they opened).

We can see in our example trade that we have 4 buyer bars before our pin bar reversal day.

(3) Wait for the ‘Pin Bar Reversal’

Once we have identified our rally, we are waiting to see two things in the rally:-

* 3 consecutive buyer bars/days. i.e. 3 days where the price went up.

* the subsequent day showing us a ‘pin bar reversal‘ i.e. a bar where the open and close price is in the lower third (or half) of the bar (regardless of it being a green bar or a red bar).

NOTE: When we say ‘bar’, this is simply the open and close prices traded on the day.

We can see in our example trade that we have our pin bar reversal day.

The ‘pin bar reversal‘ is a signal that buyer momentum is leaving the market and signals the end of the rally and a return to the downward trend that can be traded with a sell trade.

In our current example sell trade (USD/CAD) the red arrow below marks our pin bar reversal…

Of course, the converse applies to the upward trend with a bullish daily bar ‘signal’ (open and close prices in the top third of the daily bar) after at least three ‘seller bar’ days, but I will cover this in the Buy trade example below.

Strictly speaking, it’s not mandatory to have 3 consecutive days of buyer/seller bars. If other factors below check out then the trade can still be made on seeing the pin bar reversal.

(4) Draw Horizontal Lines of Support and Resistance

Pin Bar Reversal on ‘Hard’ or ‘Soft’ Level?

Hard and Soft Levels are horizontal lines drawn at the peaks and troughs on the Weekly and Daily charts over a longer period of time, from a year to maybe 5 years, 10 years, or even longer.

TIP: A quick horizontal line check on a ‘signal’ pin bar is to draw the horizontal bar at the bottom of the pin bar (if its a bullish/buy signal bar) and see if it has been rejected (bounced up from) before. If so, this is an indication of a support level and provides legitimacy for the bullish pin bar.

Both Hard and Soft levels, however, make strong points at which to trade a pin bar reversal, if the pin bar is at or very near the Hard/Soft level. In fact, if you see a pin bar reversal at either of these levels which is also confirmed by the smaller timeframe hourly check:-

* bearish formation for downwards momentum sell trade off of a peak OR

* bullish for upwards momentum, buy trade off of a trough…THEN...

… you do not need the additional ‘technical confirmation‘ trade checks (see step 8)

(5) Identify the Trade Risk to Reward (Stop-Loss and Target)

In an ideal world, we would be looking for a large reward for the potential risk and these can be taken if the setup exists. Reward:Risk of 5:1 and even 10:1 can be taken but 3:1 is a happy medium whereby the probability of achieving the target is in the sweet spot which gives us enough of a consistent return on our trading.

Our trade example image above shows the Entry price, Stop Loss, and Target Price for the trade.

The stop-loss is critical to prevent any losses becoming too large. Add the stop loss when you place your trade. The diagram below illustrates the long (buy) trade stop-loss scenario.

Calculate Reward to Risk

As can be seen on our main example trade diagram:-

Entry Price – Target Price (Reward = 245 pips)


Entry Price – Stop Loss (the Risk = 86 pips)


(6) Identify the Trade Size

As can be seen in the full image in step 1 above, we have a fictional trading account size of £10,000. So if we risk 1% on each trade (£100) divided by our risk of 86 PIPs, we place the sell trade at £1.16 (per PIP).

If the trade goes against us and we hit our stop-loss then we loose the £100. If the trade goes in our favour and we hit our target, then we make a profit of £280.

(7) Hourly Chart Confirmation

This is the main additional check and if you don’t see it then probably best to reject the trade. So, for our SELL trade setup confirmation, you can check for the bearish formation on the hourly charts. We are looking for a bearish pin bar reversal to confirm the trade. Either a ‘double top‘ or ‘head and shoulders‘ on the hourly chart:-


So for our example USD/CAD sell trade in this article, you would be looking for something like the below on the hourly chart, and then placing the trade when the neckline is broken


(8) Two additional Technical Confirmations (if Pin-bar not on ‘Hard’ or ‘Soft’ Horizontal level)

(a) Fibonacci ‘Retracement’ Check

If you’re on the daily chart, select the Fibonacci tool and draw from the most recent major swing low to its corresponding swing high (in an upward trend, converse for a downward trend). If the pin bar is at or near the 0.618 level, it is a common level at which the price action will turn in favour of the trend.

The Fibonacci check can be strengthened by drawing from the previous swing low/high (from the one you have just drawn from) to the current swing low/high. If there is a rejection, in particular at 0.382 or 0.5 in addition to the 0.618 Fib check above, you have what is known as a ‘Fibonacci cluster’ and is a strong confirmation of the first Fibonacci level drawn to indicate a movement back to the trend.

In order not to make this article too long we have a separate article just on the Fibonacci trade check:- CLICK HERE (opens in new tab)

(b) Moving Average Bounce Check

If a pin bar is on or near the 20/50/100 day MA and previous price retracements towards the trend have ‘bounced’ off the same Moving Average level, it is an indication that the same retracement will occur with the current pin-bar.

(c) RSI Divergence

Is The ‘Relative Strength Index’ indicator showing divergence from the dominant price trend?…

(d) Weekly or Monthly pivot point?

Try to select the weekly  and/or monthly pivot points indicators in your chart as shown in the horizontal purple and orange lines below...

(e) Do we have Cyclicity?

Is there a definite pattern of higher lows in an upward trend, which can be joined by a trend-line? Or lower highs in a downward trend, which can be joined by a trend-line?

(f) Big Number Check

Bouncing off a psychological round number? May even include decimals (.1, .5 etc)

(g) Hard/Soft Level Rejection

This is really just the same as the Hard/Soft levels covered above in this article…

(9) Place your trade

As I am trading the daily charts I might place my trade around 10pm GMT.

For our current downward trend scenario then, when the conditions above are met and you see the signal bar (pin bar reversal) you place the sell trade with stop loss just above the signal bar high (signal bar high + spread + 1 pip) and the entry (limit order) just above the low of the signal bar (signal bar low + spread + 1 pip):-

(10) Manage your trade


The stop-loss level can ‘trail’ your trade if the trade is going in your favour. This moves the stop loss in the direction of a winning trade in order to lock in gains.

Quit the Trade if…


Manage the trade objectively. If the trade is triggered, Trail your stop loss as follows:-

Move the trailing stop loss on every second seller bar until you hit the target or are stopped out by hitting your stop loss


The exit/target level can also be moved if desired, particularly if the trade is moving fast. As can be seen below, the initial target of the previous swing low was achieved quite rapidly. The trailing stop loss was moved as described above and then eventually stopped out for a good gain.

Example Trades: Building a case for a trade using technical analysis.


Trade checks: -


Trade checks: -


On the daily charts, you just don’t need loads of different strategies to make consistently profitable trades. One simple strategy can be enough.