Forex Trading: A Simple but Effective Daily Swing Strategy with Examples
Why Trade the Daily Chart?
It's more reliable
Requires low effort and maintenance
You can get higher reward
It is less emotional
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.
What are PIPs
Trade Size & Risk:Reward
GOLDEN RULE - ALWAYS USE A STOPLOSS
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
Trade Risk Management
Swing Trading Strategy
Trade in the direction of the trend
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
We have a trendline of lower highs lows with multiple touchpoints on the trendline including the current.
We have a horizontal line touch with the down trend causing previous support to become resistance
We have a reversal bar (an engulfing bar)
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 a trendline of higher lows with multiple touchpoints on the trendline including the current.
We have a horizontal line touch with the uptrend causing previous resistance to become support (see horizontal lines below)
We have a reversal bar (a pin bar reversal bar)
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
Try to select the weekly and/or monthly pivot points indicators in your chart as shown in the horizontal purple and orange lines below...
Example Trades: Building a case for a trade using technical analysis.
SHORT TRADE EXAMPLE...
Trade checks: -
The trendline connecting the lower highs in the downward trend has been touched and rejected once again in the latest bearish daily candle.
This bearish candle is also in 'inside' bar which means the price action/range on the bar is inside the previous days price action/range (It is also a 'high test bar' which means it is testing the swing high to see if actually wants to come down again as sellers take back control.)
The Fibonacci retracement level from the most recent swing high (Fib level 1 above) to the most recent low (Fib level 0 above) has retraced near to the classic 0.618 level.
A key horizontal level of previous support that has been breached has now been rejected on the way back up which is a classic switch where support becomes the new resistance in a downward trend.
A check on the lower timeframe hourly chart shows a 'topping pattern' such as a 'double top' or as in this case, more of a 'head and shoulders' pattern....
LONG TRADE EXAMPLE...
Trade checks: -
The trendline connecting the higher lows in the upward trend has been touched and rejected once again in the latest bullish daily candle.
The blue 20 day MA has been touched and rejected by the bullish candle.
This bullish candle is Pin Bar reversal
Previous Horizontal resistance breached and now therefore has potential to become support...
The Fib retracement measured from the most recent swing low to the most recent swing high is 61.8%...
the hourly chart shows a head and shoulders bottoming pattern...(which is also intersecting, or near to, the key horizontal level and the trendline