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 in trendless 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.

Although some traders apply swing trading to stocks, in my experience forex swing trading is the perfect form of swing trading. And, forex swing trading is better than day trading or long-term trend trading. 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.

With my mechanical trading system, I enjoy a great compromise between the two extremes of day trading and trend trading. I find short-term trends in the forex markets, ride them to profitability, then I exit my position right when the price move ends.

My mechanical trading system harvests small but consistent gains which add up over time. Even in an apparently-trendless market, I can still be successful.

My trades are based on automatic data analysis in real time, and my trading algos provide super-fast trade executions. Best of all, my trading decisions are based on objective parameters instead of relying on my emotions about a particular market.

Knowing the best entry and exit points is the key to successful forex swing trading. Forex swing trading can be based on a simple set of rules, or you can program your mechanical trading system to use a somewhat more sophisticated set of rules, as I do. In forex swing trading, my mechanical trading system uses a set of mathematical rules and indicators for buying and selling forex pairs. By relying on my mechanical trading system rather than manual trading, I enjoy several benefits.

Among the simplest approaches are those which measure the price of a forex pair by using 3 different moving averages based on closing prices.

I use a forex swing trading strategy that lets me take advantage of fairly short-term price moves, so I can profit even in an overall trendless market. I have a reliable and dependable short-term trendline-breakout strategy, and it can harvest quite a few pips from the typical winning trade. The trick is to use the best length of time frame for the moving averages, as well as the right type of moving average.

Rather than using a simple moving average MA or SMA , I program my mechanical trading system to use an exponential moving average EMA. The EMA is similar to the ordinary MA, except that it gives more weight to the most-recent data. I do this because the EMA reacts more quickly to the latest price changes than the simple MA does. This type of moving average lets me win in markets which would appear trendless over longer periods of time. Some traders use either a day or day EMA, especially to create indicators such as the popular moving average convergence divergence MACD indicator, or a percentage price oscillator PPO.

And, in comparison, the day and day EMAs are often used to signal changes in long-term price trends. Of course, you can experiment by back-testing different time periods in your own chosen markets. Try 7-, , , or day EMAs to see if they work better for your particular forex pair.

Still, after my own lengthy research, for me a 34ema works best. Using my mechanical trading system, I enter the forex swing trade just after a break in the trendline. Based on the day EMA, my mechanical trading system watches for a price rally or pullback. Then, as soon as that rally or pullback falters, my mechanical trading system executes the trade. Watch for a downward break from the trendline; 2.

Confirm that the price moves above the day EMA 34ema ; 3. After the trendline breakout downward, watch the price highs of the subsequent candlesticks; 4.

Or, my system can execute a buy-stop order only a few pips over the high of the signal; candlestick; that way, if the price breaches its high, my order will be executed; 7.

For purposes of risk management during forex swing trading, my mechanical trading system automatically places a stop-loss order just a few pips below the low of that candle which triggered my order.

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I ride the short-term swing, then harvest the gains and manage the risks as described later in this article. Using the 34ema as the primary indicator, my mechanical trading system will:.

Watch for an upward breakout from the trendline; 2. Confirm that the price is below the day EMA 34ema ; 3. After the breakout, monitor the price lows of the candlesticks; 4. Alternatively, my forex swing trading program can set a buy-stop order just a couple of pips below the low of the signal candle, so if the price breaches that low, my order is executed. And, since good risk management is essential for survival in forex swing trading, my mechanical trading system sets a stop-loss order just over the high of the candlestick which triggered my entry order.

Some traders, especially those whose trading strategies are only profitable during large moves, try to squeeze too much out of every trade.

By doing so, they often risk losing all the gains from that trade. I have a different philosophy. Since markets are often trendless or trading sideways for long periods of time, I have plenty of trading opportunities. I use my mechanical trading system to set the trailing stops just a few pips below or above each of the successive dips and rises during forex swing trading.

My forex algorithms choose the trailing stops based on the very-short-term support and resistance levels. By setting trailing stops this way, I usually avoid being stopped out prematurely.

If the short-term trend continues, I can often ride it for several days.

I use short-term trendlines and price action to great advantage. My mechanical trading system helps me enter a new trade at the beginning of the new trend. My day EMA forex swing trading strategy gives me plenty of advantages as long as I manage risks appropriately.

This strategy lets me trade with the short-term trend while avoiding the major drawdowns that some traders experience by attempting to follow long-term trends. My day forex swing trading strategy offers a critical advantage over most forex swing trading strategies.

Since moving averages are essentially lagging indicators, choosing the right time frame is the key to success.

Many forex strategies are based on simple moving averages or longer-term moving averages. So, they usually perform poorly in trendless markets. In order to enjoy the advantages of my system, I must manage the risks appropriately.

Overall, the risks of forex swing trading are comparable with any other type of speculative trading. On the other hand, during bull or bear markets forex swing trading can be even more profitable. For me, using a day EMA indicator is the best foundation for my forex swing trading.

Please provide Snapshots of the explanation. If you have this already coded in an EA I would like to try it for myself — what do I need to do to get a hold of this EA. Thanks for keeping me honest. I hope this clarifies. Do you ever use 34 ema swing trades for 4- hour or 1- hour charts? Do you strictly use daily charts to trade? Thanks for your good question. So, with this day EMA system, I just use daily charts.

Great system I use a similar strategy with three emas of the and wait for them to cross in one direction wait for the pullback and enter above the signal bar but I designed the strategy to stay with the trend as long as possible by trailing near the swings.

I think you have your info mixed up.

In a downtrend, the trend line connects the highs which creates a downward slope. If you were looking to buy, you would be looking for an upward break of the trend line not a downward break. Hi this is all well know already its a trading system by Raghee Horner http: A visual representation of this would be great to clarify the idea. Thanks for sharing it.

Is this referring to the structural trendlines that we have to draw ourselves, or the 35 EMA itself? Would be great if you could provide some charts to illustrate your ideas. Great article and good solid safe way to swing trade the Forex markets.

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I felt the ena fir 34 on a daily chart missed the move by a day and a half on checking the GBP-YEN and as a divergence trader in the main I felt the opportunities can be missed. I think that all Forex strategies need to incorporate some line studies to know the historical and bankster moves are apparent. Conservative swing and position traders would like your approach.

Shaun, I do not know but I am no big fans of every techinal Analysis that the forex house provides. Rsi , CCI, and etc does not work now days. That where we need your input and help on this. Hi Shaun, Good article. Do you have EA for the same. Keep up the good work.