Forex swing trading is a great way to make some extra money, but it does require some time and patience. You will need to determine specific entry and exit points and be constantly monitoring the trading dashboard. Many times, you will have to make manual trades. It is also essential to have the proper knowledge of the trends and candlestick charts.
Forex swing traders typically do not hold positions for more than a few weeks. In this style of trading, you will be monitoring the performance of benchmark indices. For example, the Dow Jones Industrial Average (DJI) is a well-known index. It measures the performance of the largest US companies and is commonly used by swing traders.
Identifying a break in a trend is the key to successful swing trading. You should recognize a break when a fresh high, low, or uptrend fails to break new highs. Similarly, you will want to exit a trade when the price reaches a significant support or resistance area.
Traders should also make sure to have enough capital to take swing trades. Typically, you should start with a balance of $500 or more. This will allow you to risk up to 1% of your account on a single trade. It is also important to note that you should adjust your capital for your local currency before starting a swing trade.
Swing traders rely heavily on technical analysis. These traders look at daily, four, and eight hour charts to determine whether the price is going up or down. It is important to look at the long-term trend and use this information to make your trading decisions. Using a moving average will also help you to identify a trend.
If you’re using a daily or weekly chart to trade, make sure it lines up with the weekly or monthly charts. Once this is done, zoom into the next timeframe. For example, a four hour chart can show a clearer picture of where to enter a trade. This will help you make a decision on which currency pair to trade.
Another popular currency pair to trade is EUR/JPY. This cross currency pair is very liquid, and its price fluctuations are ideal for swing trading. Traders can also use the British Pound to US Dollar currency pair. This currency pair is also heavily correlated with EURUSD, making it a popular choice for swing traders.