Swing Trading Strategy

Swing Trading Strategy – Basics for Success

Swing trading is no different to any other form of trading when devising your trading plan - you need a specific strategy and this article is all about developing a swing trading strategy for success.

Here are some swing trading tips to incorporate into using a swing trading system and implementing a strategy for success.

1. Buy a system or build your own?

There are plenty of swing trading e-books, software and courses to choose from, some are good but the vast majority are a waste of money.

They are simply put together by failed brokers or marketing companies, who appeal to buyers with enticing advertising copy.

To separate out the good from the bad, simply ask for a real time track record of success.

After all, if the vendor hasn’t got the confidence to trade his own swing trading methodology and risk money, why should you?

2. Choosing a market.

Swing trading in stocks has been popular for years, but in recent years with the rise of online trading, forex swing trading has gained in popularity.

So which is best?

This is really a matter of personal preference.

Our own view is currencies offer the ideal trading conditions as swing trading forex offers:

Volatility, liquidity, good trends and low transaction costs.

3. Devising a swing trading strategy

The first point to consider is the actual swing trading method you are going to use.

It should identify support and resistance and then when you come to enter the market, you need to decide which way price momentum is likely to go.

With any swing trading system you need to trade the odds and not guess, hope or predict.

When prices reach support and resistance act on confirmation of shifts in price momentum this will then put the odds of success in your favor.

Never trade without confirmation to confirm your trade entry levels.

4. Money management.

As with any system you must have a sound money management system.

Losses need to be kept small and you need to run your profits.

Always make sure you place your stop when you enter your trade, have a profit target in mind and bank when it’s hit.

5. Don’t try and be too clever.

Swing trading (like all trading is essentially simple) when you are devising a swing trading strategy keep it very simple and don’t over complicate it.

Many traders think the harder they work at swing trading, the more they will get out of it in terms of profit, but this is a major mistake.

If you devise a clever swing trading strategy it will probably not work. When devising trading methods, less is more in terms of, indicators, parameters or rules.

Keep in mind you may have a clever system that you have put a lot of effort into but that does not guarantee success.

You don’t get paid for effort you get paid for getting market direction right.

If your swing trading system is to complicated, it will be less robust than a simple one and will break in the face of ever changing market conditions.

6. Be careful when back testing your system

There is plenty of swing trading software you can use to back test your methodology; however you need to be careful of curve fitting.

Many swing traders can’t get there system to produce the profit levels they want, so they tweak the data to make it profitable.

They create different rules and different parameters (for different contracts or different types of trading conditions) and make the system fit the data – This will simply ensure your forex trading strategy will not work.

One trader I know likened this to shooting at a barn door and then drawing a bull’s eye around each shot!

That’s exactly what you are doing when you engage in curve fitting.

By introducing unique rules or parameters for different contracts, you will simply ensure failure rather than success.

So in conclusion, Keep it simple and don’t tweak the data.

Final words

A swing trading strategy is not difficult to devise and implement.

If you keep the above points in mind, you will have a clear plan to help you make big long term profits from swing trading in any market you choose.