The swing trading method might be the most complicated and boring strategy in the Forex market. To trade Forex by using the swing trading strategy, you should have a strong technical and fundamental knowledge. Naïve traders in Singapore can’t find the endpoint of the market retracement. They are always predicting the market trend based on complicated assumptions and thus are losing money. On the other hand, trained professionals at Saxo are using their in-depth knowledge of trading and executing random trades to earn more money.
Today, we are going to learn about the best practices to learn the art of swing trading method. Before you start learning this strategy, let’s discuss the pivot point to make things easier.
Pivot points in Forex
Pivot points are the critical price reversal point. You can consider them as the support and resistance level also. Most of the time, the market tends to end its correction at the critical pivot point. The position and swing traders use these pivot points to find the potential buying and selling zone.
So, how do find these pivot points? Though there are many ways to find the pivot points, the professional traders love to use the simple approach. Instead of using a super complicated trading method, the pro traders use the cluster of candles to find the best trading zones. Visit the site and open a practice trading account to learn about the pivot points so that you can execute the best trades without having trouble.
Developing a swing trading strategy
The pro traders in the options trading industry use the swing trading method to find the endpoint of the market retracement. This strategy is often used to find the key reversal zone. To execute trades using the swing trading method, you need to learn about the Fibonacci trading strategy. Though the Fibonacci retracement levels provide strong support and resistance, it often breaches. To find the bullish retracement level, you should draw the retracement level from low to high. To find the bearish retracement, draw the bearish retracement level from the swing high to low. Execute the trades at the 5-% and 61.8% retracement levels only.
Use of the wide stop loss
Swing traders always have to use a wide stop loss at trading. Most of the time, it becomes impossible for naïve traders to use the swing trading method because they are undercapitalized. Even if you manage to scale down the lot size, chances are high that you will not have enough patience to stick to the trade. Try to develop your patience level and start using the wide stops. However, you can reduce the risk exposure to a great extent by using the candlestick pattern trading strategy. Let’s say you are trying to short the pair on a major swing. You will set the stop loss above the last high. Instead of doing that, you can look for the bearish price action signals and execute short orders with a very tight stop.
The risk to reward ratio
A swing trading strategy may be the most efficient way to make a profit in the Forex market. Sadly, naïve traders fail to make a profit because they always take high risk. Think about the risk to reward ratio when you execute new orders using the swing trading method. Forget the fact that you are dealing with a higher time frame. Think of trading as your business and try to follow the conservative method. Focus on the long term goals and try to improve your skills by using some basic techniques. For instance, you can trade with the major trend while using the swing trading method. Never execute any trade unless you have a 1:5 risk to reward ratio. A higher risk to reward ratio gives you an added advantage in dealing with the losing orders. Eventually, this helps you to earn more money even with a low win rate.