What is swing trading and why is it so profitable for traders to do?
My name is Tyson Clayton, Senior Currency Strategist for Market Traders Institute. I’m a master Forex instructor with over 20 years of experience teaching student traders how to take ultimate control over not just their finances, but their lives.
Swing trading is my favorite style of trading because I don’t have to babysit my trades. I can get into a trade with a longer time frame stretching over a few days or even the next few weeks.
This longer time frame means I have to allow for more market movement, but I can also look to capture large profits like 500 or 1,000 pips over that period. In fact, swing trading has brought me the most profits, thousands and thousands of pips, during my trading career.
Here are some of the leading indicators used by swing traders:
A moving average is simply the average price for a particular investment over the course of whatever time period an indicator is set for. For example, if I use a 20-period moving average, I’m averaging the closing price over a period of 20 days or 20 hours.
The relative strength index (RSI) is a popular momentum oscillator that swings back and forth between the “buy” and “sell” zone levels of 0 to 100.
Visual analysis relates to chart patterns such as crowning formations, heads and shoulders, breakouts and flag patterns. In other words, these are the shapes within a price chart that help us predict what prices might do next, based on what they have done in the past.
We don’t want to rely on only one indicator when making trades. It is always best to combine multiple indicators in order to increase our probability for success.
If we can combine all three of these trading indicators together, that’s when we can look for those explosive market moves and potentially make a lot of money. Here’s an example:
Let’s say our visual analysis spots a chart pattern that resembles a bullish king’s crown formation. Next, we use a 21-day moving average to identify price support levels for our bullish crown. Also, our RSI indicator is oscillating in the buy zone, thereby giving us further confirmation. This is one of those trades we’d want to take and trade up to some type of extension, which is a subject covered in our free live trading sessions.
For more tips and strategies on successful Forex trading, visit MTI’s YouTube channel at www.youtube.com/c/Markettradersinstitute/videos.