Top Forex Swing Trading Strategies That Every FX Trader Needs to Know

Table of Contents

With any sort of currency trading, whether it is Forex or stocks and bonds, a strategy needs to be in place to be successful. Rarely will random trading without rhyme or reason get you anywhere.

Forex trading can be followed by numerous trading techniques. But what about Forex Swing Trading? Looking at swing trading, we can also break down what the best swing trading strategy is and if swing trading really works.

Forex Swing Trading Strategies

Photo Credit: Admiral Markets

What is Swing Trading?

First things first, what is swing trading in Forex?

Swing trading is a trading strategy where Forex traders make an attempt to be able to make a profit by picking both an entry and exit point that occurs right before and after a sudden turn in the market is made. This is where the swing comes into play, the trader takes a medium hold on the position as a distinct “U” shape in the chart is formed to show an upward trend beginning again. The “U” is then followed until it will take a downward turn.

This is all about buying low and selling high!

Swing trading also uses a few indicators that are pretty easy to spot. These include head shoulders patterns, flag patterns, cup and handles pattern, moving average crossovers, and triangle trading patterns.

Pros of Swing Trading

Swing trading is riskier than some trading techniques but is far from a high-risk situation. This means that there is a decent ratio of risk to reward with using swing trading as a strategy for Forex.

This trading strategy also allows for a fair amount of trading opportunities. Some trading strategies are much more restrictive in terms of amounts of times you can pick entry and exit points.

Another advantage here is that swing trading uses a fair amount of technical indicators to pull off. This means that you have the benefit of having technical support with looking at what the market is doing and when to make a trade.

Although a fair amount of time may be needed to spot the best time to make a move, swing trading does not require you to be forever glued to your computer screen. Between technical indicators and the overall way the currencies fluctuate, if you miss an entry or exit point, another will come.

Swing trading also yields an average of 2% profit per trade. 2% may not seem like much, but it is more than the average day trader.

Cons of Swing Trading

Forex swing trading strategies do require a fair amount of technical knowledge or at least the ability to quickly learn to accurately read analytics and charts. You need to be able to spot those perfect moments to put a bid in for an entry and exit point and to do so with swing trading you have to know how to read the analytics your trading platform will show you.

Using any forex swing trading technique also means that you have to be able to invest time not just money into your Forex account. Because there is a specific point in which you have to enter and exit to be able to make a profit, you must be able to sit and watch your trading dashboard. This often means making manual trades, so being able to take the time to spot trends is a must. Due to this, keeping an eye on those candlestick charts will be your key to success.

Overnight risk is another drawback to swing trading in Forex. As Forex is a 24 hour market and you simply cannot watch your charts 24/7 there is huge potential at missing your optimal exit point if you are away.

What are Some of the Best Forex Swing Trading Strategies?

There are a couple of different Forex swing trading strategies, so it really comes down to which type of trader you are to best decide what the best swing trading strategy is. No matter the chosen strategy, they tend to either follow trends or trade counter to the trend.

Trend Trading

Trend trading is often considered the best swing trading strategy for Forex. With this type of trading, the trend to spot is being able to clearly see prices going up and down more like steps rather than in a more linear fashion.

This technique also looks to take advantage of bullish trend lines. This means looking for those perfect points in which the market turns from a low and begins and an overall upward trend in growth. The biggest tell-tale sign that this trend has begun is that the lowest lows of each candlestick are beginning to fall higher and higher in value.

Profits often outweigh losses with this swing trading technique, so of the main five swing trading techniques it is the “safest”.

Counter-Trend Trading

Counter-trend trading is the exact opposite of the first strategy we mentioned. This being that for this technique, you try to spot the trends turning bearish and turning downward or breaking down rather than going upwards.

This forex trading strategy is a bit more difficult than its counterpart because it requires you to have greater discipline and it is much easier to miss the proper signal and miss either your entry or exit point to be able to make a profit.

Moving Average Strategy

Moving average strategy is a Forex swing trading strategy that involves looking at average time periods and making moves within that. This technique does take a bit more skill to pull off as Forex is a 24-hour market 5 days out of the week, so you need to have a distinct strategy to implement this type of swing trade.

  • 20/21 Period: this is often the most popular type of moving average strategy. Movements in this type of period often are more accurate in showing a distinct trend line.
  • 50 Period: this is considered the industry standard as it is one of the most popular uses amongst traders. This is often considered a happy medium between long or short term trends.
  • 100 Period: this is another strategy favoured by Forex traders as it often uses round numbers. This matches up well for those that swing trade from weekly or monthly holds.
  • 200/250 Period: This is a period strategy that works best for those that make daily holds rather than longer-term holds. This is because it displays a year of price actions so any distinct cycles can be displayed better.

Bollinger Band Strategy

Bollinger band strategy is when you end up using three different indicators to find an overall turning point at when to make a trade. These three turning points create averages in a way similar to moving averages. For those that live heavily in the world of analytics, this can be looked at like a standard deviation measurement.

If a price point is above the band it is overbought and if it is below the band it is then oversold. This strategy, like the others, is all about finding that perfect sweet spot between buying and selling and timing it just right to be able to make a profit.

Decisions are made all in how those points move up or down the bands, so this strategy does take a bit more skill and strategy to be able to use successfully compared to some of the other Forex swing trading techniques.

A Versatile Strategy

A versatile strategy is also considered a beginner strategy and fairly easy to implement into the overall tool kit of whatever techniques you aim to use, but it definitely takes a deeper dive into swing trading than some of the other swing trading techniques.

This type of trading strategy means you will use a combination of the above swing trading examples plus possible others to cater your trades day by day to fit what the market is doing to be able to take full advantage of currency movements.

This means you have minimal commitment to which type of swing trade to use all the time and you get to experiment with the best buy and hold strategy.

Is Swing Trading Beginner Friendly?

Forex swing trading techniques are often classified as friendly for beginners or those with a medium amount of trading experience. In addition to being beginner-friendly, it is also friendly for those that have a semi-busier life outside of Forex. This means those that work during that day or are doing other activities just need to be able to have enough time to invest to be able to keep up with the market and be able to hold onto their position long enough to make a proper exit.

Although you will have to have the time to find the perfect entry and exit points, the medium hold time that usually ends up being a spread of a few days to a couple of weeks allows for beginner traders to take the time to watch the market and the trends.

With the right overall strategy, swing trading is fairly easy to both learn and implement in an investment portfolio.

We'd Love To Hear From You!