Forex swing trading is a mechanical trading method that harvests gains from forex pairs over periods of one to several days. Some forex swing trading strategies produce ho-hum results range bound forex pairs trading trendless markets.
Yet, I’ve found that a strategy based on 34-day exponential moving averages works well, even during range-bound sideways markets. With the forex swing trading strategy described below, I use my mechanical trading system to take advantage of short term price trends and patterns that I might otherwise miss out on. The direction of the swing trade can be either long or short. Forex swing trading positions are usually held for a longer period than a day-trade, but for less time than buy-and-hold strategies which involve holding positions for weeks or months.
Forex swing trading offers an ideal mechanical trading strategy for independent traders like me, since my algo trading system can quickly recognize and exploit short-term price movements more effectively than large institutional traders can. And, forex swing trading is better than day trading or long-term trend trading. Here’s my reasoning: Although day trading can be good for risk management since the trader doesn’t hold positions overnight, it also limits the profit potential, since large price moves can occur overnight. Trend trading may capture the profits of longer-term price moves, yet it also puts the trader in a position of facing worrisome drawdowns while awaiting the anticipated continuation of a trend. Forex swing trading offers the best of both worlds: It has the advantages of trend trading and day trading, but without the drawbacks of either method. The twenty-four-hourly nature of currency markets is ideal for swing trading.