Mechanics of a Swing Trade

Raghee Horner of Interbank FX, talks about swing trading in her latest post. “A swing trade is a setup that

Raghee Horner of Interbank FX, talks about swing trading in her latest post.

A swing trade is a setup that requires a trending market and a correction (or “swing”) of the trend. The swing itself therefore becomes the entry set up as prices correct within the up to down trend. The 15 minute intraday GBP/USD is an example of a downtrending market that is currently correcting within its downtrend. What is determined to be a “correction” or “swing” is dependent upon the tools a trader uses to identify support and resistance. I prefer to use my 34EMA Wave, Fibonacci levels, past highs and lows, and psychological levels.

I myself don’t actually use her “34 EMA Wave” technique, it’s not something I have tried, but she does keep mentioning it quite often, so it’s something I think I might have to look into in the near future. The other points she mentioned, i.e. fibs, recent highs and lows, and psychological levels (such as 00’s and 50’s) are of course no-brainers.

It’s also very useful to take a look at different timeframes when trading the intra-day charts. It’s a bit like having a bird’s eye view on what’s happening in the market as the overall picture is concerned. This doesn’t mean it’s essential, but when trading the lower timeframes I think it’s more important to look at higher timeframes. However, the opposite it not true, i.e. when trading higher timeframes, in my personal opinion, it’s not that important to look at lower timeframes.

Now obviously, when trading lower timeframes, it’s doesn’t mean you have to look at higher timeframes, and even if you do look at higher timeframes, it doesn’t mean you have to trade in the direction of the higher trend. Generally, I personally find it harder to trade against the longer trend, it’s more risky, and unless you know what you’re doing, picking tops and bottoms is gonna burn a hole in your pocket.

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Raghee goes on to say:

There are some recent highs that could help identify where the GBP/USD may exhaust as it bounces or corrects. Notice the highs across the 1.5160 to 1.5163 area. Prices on the 15 minute chart have been rejected from this level four times. This is exhaustion at resistance. Notice that it is also near the resistance of the 34 period EMA low at 1.5155 which is the trigger I most often use for swing shorts in a downtrend.

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