Swing Trading Strategy Using Pure Price Action

Forex swing trader strategy


Swing trading is a trading strategy where positions are held for several days to capture price swings in the market. Unlike day trading, where trades are closed at the end of the day, swing traders keep their positions open for a longer duration. This type of trading strategy is ideal for those who cannot commit full-time to the markets but can take out some time every day to monitor the market conditions.

While there are numerous approaches to swing trading, this article focuses on a strategy that uses purely price action - no technical indicators, no complicated setups. Just pure, unadulterated price action. Let's break down this strategy step by step:

Understanding Price Action

Before diving into the strategy, it's crucial to understand what price action is. Price action refers to the movement of a security's price plotted over time. It forms the basis for all technical analysis of a stock, commodity or other asset chart. Many short-term traders rely exclusively on price action and the formations and trends extrapolated from it to make trading decisions.

Identifying the Trend

The first step in this swing trading strategy is identifying the market trend. You can do this by looking at the higher highs and higher lows (for an uptrend) or lower highs and lower lows (for a downtrend). The basic rule is that if the price is making higher highs and higher lows, it's an uptrend, and if it's making lower highs and lower lows, it's a downtrend.

Swing Points

The next step is to identify swing points. These are points in the price chart where the price action changes direction. In an uptrend, these are the lows, and in a downtrend, these are the highs. Swing points are essential as they help us determine when to enter and exit trades.

Entry Points

Now, you'll need to identify entry points. For long trades in an uptrend, you'll want to enter at or just above a swing point low. For short trades in a downtrend, you'll want to enter at or just below a swing point high. The idea here is that you're catching the price as it bounces off the swing point and continues along with the trend.

Stop Loss and Take Profit

Finally, you'll need to set your stop loss and take profit levels. A stop loss is an order to sell a security when it reaches a particular price, while a take profit order sets the target price at which you want to take your profit.

In this strategy, for long trades, you'll want to set your stop loss just below the swing point low you used as your entry point, and your take profit level at or just below the next swing point high.

For short trades, you'll want to set your stop loss just above the swing point high you used as your entry point, and your take profit level at or just above the next swing point low.

 

This swing trading strategy using pure price action can be highly effective, but like all trading strategies, it requires discipline, patience, and practice. Make sure you understand the concepts fully before implementing them, and always use a demo trading account to practice and perfect your trading skills before going live.

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