The two styles suit different traders, because of the difference in available capital, free time, market hours etc. Day trading strategies are more suited for traders who want a quick compounding of gains. Day traders tend to close all trades at the end of a single day. Hence, each new day they aim to start with a clean slate to limit their exposure to weekend and overnight moves.

Deciding between the two styles depends on what type of a trader you are looking to become. Both swing traders and day traders seek to make a profit, but the difference lies in style, working methods as well as expected proficiency. If you are ready to learn about technical analysis in greater detail and rely on it to make profits, swing trading might be better for you. However, be aware that you really need to be comfortable with using these tools, especially technical analysis. Day traders, on the other hand, rely much more on charting systems, software, and some scalping techniques.

Swing traders make a profit and incur losses much more slowly than day traders but incurring great losses or making big returns in swing trading strategies is not uncommon either. This is because swing traders tend to open fewer trades, but these are usually opened on larger positions.

On the other hand, swing trading is different compared to position trading as the latter is a long-term trading approach where positions are held over a few months. Range trading is one of the more popular trading approaches. This type of trading strategy aims to capitalize on ranging currency pairs that are mostly moving sideways between identified support and resistance levels.

As such, technical analysis tools should be used to find support and resistance levels on a chart. Traders are essentially looking where the buyers may face challenges during an uptrend i. One of the most popular forms of range trading is rectangle trading. As you can see in the chart above, the price action is confined for most of the period within a trading range. Over a period of two months, the price action touched or came very close to support and resistance levels on eight occasions.

Only once out of total eight swings did the price action leave and close outside of the rectangle. Therefore, this swing trading Forex strategy is simple: buy the lows and sell the highs. Now we will look at how to base your trading setup in range trading. Once the price action approaches the support or resistance levels, you start monitoring the price movements more closely.

Forex Swing Trading: The Ultimate 2021 Guide + PDF Cheat Sheet

In the center of the above price chart, we see the price action moving lower after creating a false breakout at the top of the chart. The stop loss is placed about 25 or 30 pips below the support line to allow for uncontrolled market moves, like the failed breakout at the top of the chart. The take profit order placement depends on your trading style. If you are a more aggressive trader, you will be looking for a move towards the opposite end of a range. Alternatively, you could decide to book profits when the price action approaches two moving averages - the period and period.

Hence, you risked 25 pips to gain 80 pips, a risk-reward ratio of more than You needed just one day to complete your trade.

If you had waited to exit until the price reached the other end of the rectangle, it would have taken approximately 2 weeks for the price movement to reach that area, booking you about pips of profit. The breakout trading technique is the opposite of trading ranges. A breakout occurs when the currency breaks above resistance or below support on rising volume in Forex, the volume component is often ignored as there is no central volume data source for the Forex market.

As a result of the breakout, the market is most likely to trade in a continuing uptrend or downtrend.

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The best breakouts usually take place after long consolidation phases. A great advantage of breakout trading is the fact it works on all time frames and markets. Hence, you can apply this strategy to day trading, position trading, scalping, swing trading, etc. The first phase in breakout trading is finding a currency pair that is trading in a consolidation phase , which is characterized by decreasing volatility.

Breakout traders can trade breakouts from other consolidation formations as well as rectangles, such as channels , wedges , pennants, triangles , and flags. The key focus is the point when the price action breaks outside of the defined range, preferably on rising volume. The red arrow shows that volume is decreasing, which points to a potential breakout scenario. Although the price action briefly moves above the resistance of a rectangle, the volume shown in the indicator at the bottom of the chart does not indicate a successful breakout move is likely to happen. However, the price then leaps higher to close comfortably above the rectangle.

This time, the volume figures print the highest level seen in the last few months, verifying this breakout. The red arrow in the price chart below shows the volume data that are behind the breakout candle. Potentially, there are two entry strategies we can try here. The first option is to open a buy position as soon as the price closes above the resistance line.

Taking the immediate buy option means you are in the game as you enter the market without any hesitation. The pullback option offers a better risk-reward ratio as your entry point will be closer to your stop loss. However, there are no guarantees that the price action will return lower for a retest, meaning that if you wait for a pullback, you might miss the opportunity. In this illustrated case, both scenarios would have worked out well. The difference in entry price was around 30 pips.

A stop loss should be placed around 40 pips below the former resistance to have some cushion in case the market whips lower. Since we are trading a breakout from a rectangle, we measure its height to calculate our profit-taking level. The end of the upper blue arrow signals the zone where we should consider taking our profits.

Therefore, the risk-reward ratio in this trade is around Fibonacci retracement is a technical analysis indicator used by traders to find potential support and resistance levels on a chart. Based on a numerical series, Fibonacci uses horizontal price levels to determine potential areas of interest for buyers and sellers. There are five widely used Fibonacci retracement levels: Fibonacci retracements are drawn by connecting an important price point on the chart when the uptrend or downtrend started, to the point when it ended.

In essence, you connect the swing high with swing low, and vice versa. Fibonacci retracements are one of the most popular technical indicators.

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Of course, no technical indicator is perfectly reliable, but Fibonacci retracements do tend to cause a market reaction when they are confluent with other indications of support or resistance. This swing trading Forex strategy is focused on three central retracement lines - Our goal is to try and capitalize on possible market reactions off these levels. The first purple circle highlights a bearish market reaction.

The price action rotated lower as soon as it touched the Our aim is to hold the position open until the price movements retrace to the first lower Fibonacci retracement. Hence, selling at The stop loss should be placed around pips above the In both cases, the price action retraced comfortably to the lower Fibonacci retracement line.

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In general, it is advised to place more capital than the minimum amount due to the fact that several losing trades can easily send your account balance below the recommended level. My suggestion is to start with the daily time frame. Once you become profitable at swing trading with the daily, feel free to move to the 4-hour time frame.

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As a general rule, price action signals become more reliable as you move from the lower time frames to higher ones. Think of drawing key support and resistance levels as building the foundation for your house. These are the most basic levels you want on your charts. They provide a great foundation for trading swings in the market and offer some of the best target areas. If you want to know how to draw support and resistance levels, see this post.

Not all technical traders use trend lines.

Swing trading patterns

They not only offer you a way to identify entries with the trend , but they can also be used to spot reversals before they happen. Be sure to review the lesson I wrote on trend strength see link above. It will explain everything you need to know to use trend lines in this manner. At this point, you should be on the daily time frame and have all relevant support and resistance areas marked. Notice how each swing point is higher than the last.

You want to be a buyer during bullish momentum such as this.

How to Swing Trade Forex With 3 Strategies

On the opposite end of the spectrum we have a downtrend. In this case, the market is carving lower highs and lower lows. Last but not least is a ranging market.