Currency Swing Trading
The basic set up
The following trading set up is suitable for beginners as we will be looking at medium term trends that last for several months. There is nothing clever about the system; we are simply looking to ride the moves made by the investment banks. I like to view trading as a surfer waiting for the right wave to come along before hopping on board for the ride and trying to make it as far as you can. To this end, trading is neither stressful nor emotionally charged.
The chart below is a daily EUR/USD chart. First of all, we need to draw a trendline so we link recent highs (a) and (b) and extend the line downwards. The ease of this will depend on the platform you use - I use Metatrader for charting.
Then we copy and paste the line to produce the lower line and move this to a recent low (g). This gives us a bear channel and an idea of how far any trades can realistically move before we expect some kind of reversal. Note that because we're in a bear channel we will only be shorting and not taking long trades - as they say, the trend is your friend, so we will hop on for a ride, letting the big boys move the market for us.
Above, we have "zoomed in" to the hourly chart (simply select to view the hourly chart rather than actually zooming in ) and can see the same points at which the price reached the upper trend line for the bear channel that we've created. As you can see, the market is not precise but we accept this and hence we do not use ultra tight stops. At the present time, given the market conditions, I think 50 pips is a reasonable stop. We can easily take short trades when the price reaches the upper trend line at (c), (d), the day after (d) and (f) for at least 50 pips of profit per trade. The entry relating to point (e) would of course have resulted in a loss as it whipsawed the trend line by about 80 pips. That is not a problem as we cannot reasonably expect to profit from every trade. Note: I do not draw trend lines and channels on the hourly chart; I only draw them on the daily, which gives me an indication of the direction to trade in.
So the key to profiting from this style of trading is to learn to draw trend lines and channels on the daily chart. Additionally, you will need to learn about how to manage a trade, money management and, most importantly, the psychology of trading.
I am not here to make money from beginner traders but as I have taken the time to present to you a profitable way of trading and value my time, I encourage you to donate to a charity of my choosing whether you make money from this system or not. Please contact me for details and I can send you a link to enable you to donate directly to the charity - note that I will not have access to the money donated.
Warning: Trading involves the risk of loss. Please consider carefully whether trading is appropriate to your financial situation. Only risk capital should be used when trading. You are at risk of losing more than your initial investment. Past results are not necessarily indicative of future results.