Swing Trading Tips
Last updated on November 9th, 2019
If you were to ask successful traders what their most profitable trades are, you may be surprised to hear it is their swing trades. While shorter term trading gets the most air play, people who understand the markets would much rather learn how to swing trade online than any other type of online trading.
Swing trades are not a fad. In fact, one of the best swing trading tips I could ever give someone is to treat their trades as not only wealth building but also income producing. What is great about these types of plays is that they are designed to take advantage of the bigger moves that take place in almost every liquid market. The following graphic shows what types of moves you are looking to take advantage of.
There is no other way for the markets to move than what is shown above. Swing trades are taking advantage of move number two and move number 4. Moves one and three are better left to those people who like to range trade or never took the time to learn proper swing trade systems online.
What this chart shows are the four stages the markets go through.
1st stage – Known as accumulation phase and this is where traders are taking positions in anticipation of the move up
2nd stage – This is the mark-up phase where those that got into the move down at 1 are making some hefty profits. There are also late comers who want to get on board the move up
3rd stage – The distribution phase where the unwinding of positions takes place. This is where you want to get out before the next phase starts to take away your profits
4th stage – The markdown phase where prices are dropping. In some markets, traders will take positions at 3 and enjoy the ride down with 4.
Another of the swing trading tips I want to share comes from this chart and is to make sure you know where you are in terms of the four stages. These four stages show you three different types of market action. One and three are ranges, two is an uptrend and four is a downtrend. Knowing where you are will determine if you trade and what type of position you will take.
No matter where you learn to swing trade online, if they are not showing you to buy/sell in the areas shown on the next chart, you best think twice about taking any swing trades that they suggest.
Let’s summarize some swing trading tips and tricks with what we have covered so far:
- Swing trades are good for wealth accumulation and income production
- Every market moves in 4 distinct stages
- Swing trades take advantage of stage two and four
- Knowing what stage you are in is vital to ensure you are taking the right type of trade or any trade at all
Knowing what stage you are in is part of the battle in participation in profitable swing trades. Each of the four stages is going to have its own unique way to be traded. This is where we get into the meat of this article. You can overcomplicate trading but in the end, simple wins. When the market is going up, you will trade it differently than when it is going sideways.
Swing Trading Tips & Tricks
The chart we have been looking at is a daily chart and to keep things simple, we shall stay with the exact same chart.
Swing Trading Tip #1 – During stage two, we will focus on trading breakouts to the upside as well as pullbacks (retracements) in price
You will notice that each of these entries has an objective place to place your stops.
- Below the range after the breakout occurs
- Below the turn after the pullback in price
Swing Trading Tip #2 – During stage four, focus on trading breakouts to the downside and sell rallies in price.
Tip #2 is the exact opposite. This chart didn’t have a range but did have two nice rallies that you could take advantage of. After the last sell, there was some downside to take advantage of but the chart then went back into stage #1.
Now that we know what to look for, there are a few other swing trading tips to think about.
- Depending on your account and experience, limit risk per trade to between 0.5 and 2% of your overall account size.
- Ensure your overall market exposure doesn’t exceed approx. 6% of your overall capitalization
- Protect yourself against adverse market action by placing a protective stop in the market at the time of trade execution
- Focus on proper trading and let the money take care of itself
- You CAN go broke taking profits if the profits are consistently smaller than your losing trades
- There is a huge difference between someone who knows about swing trades and an actual trader
The final point of the swing trading tips I want to share with you is the concept of scaling out. Scaling out has quite a few pluses to it:
- Bank profits when the market gives them
- Reduce exposure on open trades
I don’t want to cherry pick so I am going to stick with the chart we have been using instead of gearing down to a slightly smaller time frame to zone in on market structure. It will still give you the concept on this method of managing your swing trades.
Assume you took a long position after the breakout and placed your stop under the range. Price goes hard in your direction but at #1, price stalls for two days. Scale out part of your position and move stop to break-even. Once price breaks to the upside, your stop comes in near the bottom of range #1.
At #2, we have a multiple day pullback in price. I would scale out at this area and once price breaks to the upside, my stop would be moved to below the swing which locks in profit on the remaining positions.
That wraps up this Swing Trading Tips & Tricks article and I hope you have found some useful information to help you with your swing trades. I can think of no better way to trade than to place swing trades in the Forex market by following the swing trading tips laid out in this article. Here is to wealth accumulation and income producing swing trades.
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