Things You Need to Know About Swing Trading Strategy

Contributed article in our business series. Enjoy! – Kimberly

A trading strategy should develop based on the trader’s personality. People who love to trade with low risk and execute less trade should go for a swing trading strategy. To them, scalping will be the most aggressive strategy. Most importantly, they will not understand the random execution of the trade associated with the scalping strategy. However, new investors in Australia might face some difficulties in understanding the swing trading method. Due to their lack of knowledge, experience, and skills, they will fail to speculate on the price movement properly.

Learning to use the swing trading strategy is not so hard. If you follow the basic rules mentioned in this article, you can expect to become a professional swing trader.

Swing high and swing low

The first thing which you need to learn as a swing trader is a swing high and swing low. A swing high is such a price zone that was not tested in recent times. On the contrary, a swing low a specific price level where the price most likely to find support. Based on the swing and swing low, the professional finds the retracement point of the trend. Though you can manually find the retracement phase of the major trend, the pro traders prefer to use the Fibonacci retracement tools.

Finding the retracement level

To find the bullish retracement level, you need to drag the Fibonacci tools from swing low to swing high. On the contrary, to find the bearish retracement level, you need to drag the Fibonacci tools from the swing high to low. Though the Fibonacci trading strategy is a very powerful tool to analyze the CFD market, you must be prepared to lose trades. However, you can improve your win rate by ignoring all retracement levels. Just focus on the 50% and 61.8% retracement level. These two levels are well respected and the price tends to move in favor of the trend after testing this level.

The reversal in major trend

Being a swing trader, you should not expect the market will never change its trend. High impact news like interest rate change, unemployment claim, etc. can change the course of a trend. So, the swing traders are advised to learn about the fundamental factors to reduce the risk of trading. However, if you trade the market with managed risk, you can make a profit based on technical data only. But ignoring the fundamental factors is a big mistake. Just by using the basic concept of news analysis, you can greatly improve your performance. To learn about the price driving catalyst so that you can make the perfect decision without having any hassle.

Think about the risk exposure

The swing trades have to use a wide stop loss. So, it’s very obvious they will need a huge capital to earn more money. But those who are smart often use the price action technique to use a tight stop loss. Using the Japanese candlestick pattern in the swing trading strategy is the most efficient way to reduce the risk of trading. However, learning to analyze the Japanese candlestick pattern is not so easy. You must use the demo account or else you will lose huge money in the learning stage.

Educating yourself like the pro trader

By now you know the details to become a pro swing trader. But do you have the perfect knowledge of the swing trading strategy? To learn the details of the swing trading method, it’s better to seek help from the trained traders. They will give you useful tips by which you can easily eliminate the false signals. You can’t make your system perfect by reading books and articles. You need some help from the real traders who have a proven track record as a professional swing trader. If possible find a great mentor who can teach you the details of this system. But seeking is for the improvement of your strategy. Never think you can’t learn a swing trading system without taking the help of others.

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