Swing trading became popular in the 1990s as the huge equities bubble formed, allowing massive profits to be made from one of the most strongly trending markets in modern history. Traders simply bought the strongest stocks or indices every time they pulled back a bit, and rode the subsequent surge to new highs. It was a heady time.
When the markets are in the right kind of mood, swing trading is the most enjoyable way to harvest money from the pits. But the markets aren't always in a giving mood - swing trading is only a profitable tactic when your trading vehicle is moving strongly up or down. Attempting to catch big moves (which is the main goal of swing trading) during a shifting or range bound market is a painful way to whittle down the size of your trading account.
When the markets are in the right kind of mood, swing trading is the most enjoyable way to harvest money from the pits. But the markets aren't always in a giving mood - swing trading is only a profitable tactic when your trading vehicle is moving strongly up or down. Attempting to catch big moves (which is the main goal of swing trading) during a shifting or range bound market is a painful way to whittle down the size of your trading account.
In today's market, forex swing trading is one of the most reliable ways to make money. Forex trading is not without risk, but unlike stocks, when a currency establishes a trend, it is typically clear to the human eye (by simply reviewing a standard fx chart) AND currency trends often last for weeks, months, or even years. It's difficult to over state just how valuable that is, particularly to the trader who is NOT interested in hanging around in front of his or her computer all day long. Or all night long, in the case of currency trading.
This is not to say that currencies are ALWAYS trending. They each have periods of range trading, just like any other vehicle; the successful forex swing trader will need to be able to spot the difference between trending and range bound markets. That is the very first step: nothing else matters until you can be comfortable you are looking at a trending market. How can we do that? There are two general approaches - the first way is pretty organic, the other way is indicator based.
The easiest way - the organic way - to determine a trend is to simply look at a chart and see if you can easily draw a diagonal line from one corner to the other and have it mostly match the price action. That's not difficult, is it? And since there are only a handful of currencies you will likely be looking to for swing trade opportunities, you can do this without investing hours at a stretch.
The other way the swing trader can determine a currency trend is to pick one of many indicators aimed specifically at filtering trending markets from ranging markets.
The ADX, the Aroon indicator, fractal pivot points, and others - any of these indicators can make identifying trending/ranging behavior simpler. There are literally hundreds of indicators and variations on indicators traders use to make this call (trending vs. ranging); some are complex to the point of being useless, and others are very elegant in their simplicity. I prefer the simpler options, but you owe it to yourself to check out a number of them to see what works for you and your overall trading plan.
