Please make the appropriate adjustment for your own currency if required. Some orders will fill over night and may even be closed out by the morning. Trades that are filled typically last several hours to several days. We let mathematics increase our account value by setting targets which are larger than our stop losses. Before getting into the mechanics of swing trading, you need to have the right type of forex account.
A micro account allows you to trade in 0. A mini account makes you trade in 0. A pip is how currency movements are measured. If the price of a currency moves from 1. Say you find a trade where you need to place a stop loss 70 pip below your entry price. Several losing trades and your account is severely depleted! If mini lots are bad for a small account, standard lots are out of the question. The nice thing about a broker that lets you trade micro lots is that you can really fine-tune your position.
If you are only allowed to trade mini lots then you need to either take 1 mini lot equal to 10 micro lots or 2 mini lots. Trade micro lots and trade with a broker that lets you trade in micro lot increments regardless of account size.
This is what it looks like:. If I am taking a long trade I place a stop loss 5 pips below a major swing low in price. The stop loss on a short position is placed 5 pips above a major high, plus the typical spread. If you are unsure of pip values, you can always check the amount you have at risk on a trade in MetaTrader4. Hover your mouse over the stop loss level on the screen to show the dollar amount at risk. You can also learn how to calculate yourself: Take three separate positions at the same price, each for 1 micro lot the level II plugin makes this easy.
Place the same 30 pip stop for all of them. Our target is always at least two times our risk. If risking 30 pips, we place our targets at 60 pips or more. Book your profit and look for other trades.
There are loads of forex pairs and other opportunities. If you take more than one position, and the market structure allows it, you can exit part of the the position at 2x the risk, and another portion of the position at 3 x the risk…or greater. Setting targets at 2x or 3x risk is a bit arbitrary. There is nothing magical about these numbers. Yet I tell new traders to use them, and to take profits at these levels, because it gets them used to making more money on winners than they lose on losers.
My trades could end up being 2. Your gains are at least twice as big as your losses. You set your orders and that is it. I recommend going through about 20 charts a night if you are starting out. Once you know what to look for, total trading time should be less than 20 minutes a night. Each night I flip through the charts, put out new orders if needed, or adjust pending orders as required…all in under 20 minutes.
I use a 4-hour chart as my overall guide for the trend. When possible I like to draw crude trend channels around the price on the 4-hour chart to let me know where support and resistance areas are.
I only take trades in the overall direction on the 4-hour chart. The chart below shows an example click to enlarge. The 1-hour chart above shows a downward sloping trend channel. My ideal trade is taking short positions near the top of the channel in a resistance area.
If the market structures allows for a target that is 4x risk or greater, use it. When those opportunities occur, take advantage.
This style of trading is not about being right or wrong. Get rid of that mindset. The House has a statistical edge in blackjack which is realized over many hands.
In trading this way, we do too, but we need to be relentless in putting out our orders and letting the market play out. Keep your hands and mind out of your trades once in them.
Let the math work. Every trade should offer the potential to make at least 2x risk, based on the market structure. I enjoyed reading the article. It reminds me of my early days learning forex trading 2 years ago. Were you trading 1: I do utilize leverage…when day trading up to about For swing trading, it is quite a bit less…usually less than 5: Really enjoying your acticles Cory, very informative and easy to understand. Great job, keep up the great work. That could be said of any method. We never know if a single trade will work out or not, but over many trades we have a profitable edge.
Trend channels work fine, as long as the wins are bigger than the lossess…and they should be if using the method correctly. Please pause and think before you make a post like this in the future.
This is what it looks like:More...