Any advice on swing trading in the forex market?


Here’s another forex related question, though it’s got wider application.

John,

I would like to make a swing strategy for FX market, any advice on this?

Just 4 major currencies – nothing to complex for a start.

Thanks,

Adam

First of all, sticking with the major currency pairs is definitely a good idea for new traders. The more regional ones are harder to trade profitably, especially in the short-term, because of wider spreads. Any combination of the EUR, USD, GBP, CHF, and JPY will be very tradeable, and you can toss in the CAD and AUD as well, though some of the crosses with them are less meaningfull (not many folks trade CAD/CHF).

Don’t feel like you have to stick to just the USD pairs, however. The crosses can be at least as tradable, and for your style of trading potentially a better option. My recommendation there is to experiment and see what pair or pairs you feel most comfortable with.

Beyond that, there are basically two types of trading. One is focusing on ranges. The other is focusing on trends. Both types of trading can be effective in any timeframe. The former tends to have higher win rates, but the latter has the bigger winners.

This is a personal trade off. Some traders can’t handle the sizeable drawdown and long losing streaks that trend trading can produce. Others can. As an individual you need to look at the way systems of both styles work deep down to make the best choice for you. This may mean working with them live – but that should be with as little money as possible.

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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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  • http://mpwilson.com/ Mike Wilson

    John,

    Given this, what would you recommend as a source for more information? I’ve been moderately successful at day-trading for the past six months, but everything I read seems to indicate my trading personality lends itself much more strongly to currency trading.

    I’ve started a bit (with teensey increments) but the lack of a volume measure has me feeling completely blind.

    Any thoughts or recommendations?

    All ears,

    - Mike

  • http://www.theessentialsoftrading.com John

    Mike – What has you thinking of switching both timeframe (day to swing) and market (stocks? to forex)?

  • http://mpwilson.com/ Mike Wilson

    John,

    I’m sorry. I’m a little twitchy today (which contributes grandly to my larger point ;) I didn’t mean switching day to swing. Just equity to forex.

    For instance: I was frequently doing things like putting on a half-size position then changing the direction (long and short) with a full-size block to get “both ends” of a break. Granted, that’s a fool’s game. But it’s worked for me every once in a while.

    Using Think or Swim’s platform I’m writing my own studies and strategies after candle and other trend reversal patterns, etc.

    But the forex world at large just operates on such a different news scale that, while there aren’t 20k+ instruments to trade, it more than makes up the difference in scope of understanding.

    I was just poking around for a little guidance. Definitive works on the subject, resources and above all, recommendations if you’ve got some.

    - M