Foreign Currency Exchange

Best 3 Forex Swing Trading Strategies That Really Work

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Swing trading is a convenient method to trade forex , especially people who are just starting to trade part-time.

It does not require traders to stick on their trading stations the whole day long. Instead, majority of swing trading strategies do not require more than a couple of hours a day. This is only to search for applicable trade setups between the currency pairs you are trading. It usually only takes a few minutes to determine if the currency pair is worth looking at. Once you have narrowed the number of pairs down to a few applicable trading setups, you can begin to analyze which trade to take and which trade to skip. This process typically takes less than an hour to complete, making it suitable for new traders operating part-time.

For now, you can keep your day job while still mastering the trade of trading the currency markets. We have compiled 3 strategies for swing trading that might work well for you.

 

Fisher Arrows Trading Strategy

Trading the long-term trend is a proven method of trading the market. This is especially true with swing trading. Higher time frames are where most institutional traders who trade positions play. These traders trade on the basis of fundamental analysis and widely used technical indicators that they know are being sought by other institutional traders as well. This also includes long-term trend indicators. This is also where most swing and position traders depend on the direction of their trade. Getting this right on higher deadlines usually means winning half the battle.

The other half of the battle depends on the moment of entry. Now, there are many ways to determine the entry time. However, most of them depend on the confluence of several conditions. Usually it is about aligning the medium-term trend with the short-term trend or signal of momentum.

The Fisher Arrows Swing Forex Trading Strategy is a strategy that provides trading signals based on the confluence of the medium-term trend and the momentum signal, while at the same time operating in the direction of the long-term trend.

Fisher Indicator

The Fisher indicator is an oscillating indicator which helps identify trend direction. The indicator’s mathematical equation is based on a statistical normal distribution. This method allows the indicator to indicate how far price has moved from the mean as well as show the peaks and troughs within a trend.

The indicator indicates trend by displaying histogram bars. Positive bars indicate a bullish trend while negative bars indicate a bearish trend. This makes the indicator very useful as a trend filter indicator. However, crossovers from negative to positive or vice versa could also be interpreted as a trend reversal signal.

Lukas Arrows and Curves

Lukas Arrows and Curves is a custom indicator which provides trade entry signals. These signals are based on momentum price movements.

The Lukas Arrows and Curves indicator draws two lines on the price chart. One line above the other, forming a channel.

This indicator also paints arrows on the price chart indicating an entry signal whenever it detects a momentum reversal. These signals are based on the closing of price beyond the channel, which is indicative of a strong momentum candle.

Trading Strategy

This strategy aligns its trades with the long-term trend, which is based on the 200 Simple Moving Average (SMA). Trades are taken in the direction where price is in relation to the 200 SMA. Aside from this, the 200 SMA should also be sloping in the same direction.

The mid-term trend is based on the Fisher indicator. The mid-term trend should be aligned with the long-term trend based on whether the Fisher histogram bars are positive or negative.

Finally, the entry signal will be based on momentum shifts. These momentum signals will be provided by the Lukas Arrows and Curves indicator by printing arrows indicating the entry candle.

Indicators:

  • 200 SMA
  • lukas1_Arrows_Curves.ex4
    • SSP: 14
  • Fisher.ex4
    • Period: 36

Timeframe: 4-hour and daily charts only

Currency Pairs: major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price should constantly be above the 200 SMA indicating a bullish trend.
  • The Lukas Arrows and Curves channel should be above the 200 SMA.
  • The 200 SMA should be sloping up indicating a bullish long-term trend.
  • The Fisher indicator should be printing positive lime histogram bars indicating a bullish trend.
  • The Lukas Arrows and Curves indicator should print an arrow pointing up indicating a bullish momentum entry signal.
  • Enter a buy order on the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal below the entry candle.

Exit

  • Close the trade as soon as an opposing signal is produced by the Lukas Arrows and Curves indicator.
  • Close the trade as soon as the Fisher indicator prints negative red histogram bars.

 

 

Sell Trade Setup

Entry

  • Price should constantly be below the 200 SMA indicating a bearish trend.
  • The Lukas Arrows and Curves channel should be below the 200 SMA.
  • The 200 SMA should be sloping down indicating a bearish long-term trend.
  • The Fisher indicator should be printing negative red histogram bars indicating a bearish trend.
  • The Lukas Arrows and Curves indicator should print an arrow pointing down indicating a bearish momentum entry signal.
  • Enter a sell order on the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal above the entry candle.

Exit

  • Close the trade as soon as an opposing signal is produced by the Lukas Arrows and Curves indicator.
  • Close the trade as soon as the Fisher indicator prints positive lime histogram bars.

 

 

 

 

Conclusion

This swing trading strategy is an effective swing trading strategy.

Many momentum-based trade signals are effective when traded on the 4-hour and daily charts. This is because traders would often take cues coming from the previous trading session. For example, traders who trade on the New York open would often take cues coming from the London session. This is often in line with the 4-hour and daily charts. This is what makes momentum signals quite effective on these timeframes.

There are times when price would temporarily chop around on the lower timeframes after the trade signal is taken. However, traders would often still take cues coming from a momentum signal which would often result in a trending market condition.

A sound trade management skill is also necessary on these timeframes. Swing trading allows traders to leave the trading station often. However, even on these timeframes, price movement is still unpredictable. For this reason, traders should learn to trail the stop loss effectively in order to ensure profits instead of giving it back to the market.

 

Professional MACD Trading Strategy

You might have heard that trading charts are fractal. This means that the same patterns and behaviors occur again and again across different timeframes. To some extent this is true, but there are limitations to this. If it were totally true, then any strategy that would work on the 1-minute timeframe should also work on a daily chart. If you have observed currencies on both charts, you would know that this is not always the case.

Components within a strategy, such as price action, indicators, or filters, should match the timeframes that you are trading on. There are indicators that work well on the 1-minute chart but is totally rubbish on the 5-minute chart. There are also strategies that work on the daily charts and the 4-hour charts but does not make any sense on the 15-minute chart.

This strategy makes use of a very popular trading indicator that works well for swing trading. It is not perfect, but it does bring in some pips.

Zero Lag MACD

The Moving Average Convergence and Divergence (MACD) is a widely used technical indicator. In fact, many professional technical analysts use this indicator. This is probably why the MACD seems to be very effective on the higher timeframes.

However, even with its effectiveness, the MACD does have an Achille’s heel. It tends to lag too much.

The Zero Lag MACD is a modified version of the MACD. It is tweaked to adjust for the lag in order to provide traders a timelier indication of what the market is doing.

This indicator works much like the regular MACD. It displays a line and histogram bars. The histogram bars represent the traditional MACD line, which is the difference between two moving averages. The line represents the Signal Line, which is a moving average derived from the histogram bars.

Crossovers between the histogram bars and the signal line serve as an early indication of a probable reversal. These crossovers usually occur when the market is overextended based on the MACD indicator. Crossovers of the bars over the midline is another trend reversal signal. It may be a little more delayed compared to the histogram and signal line crossover, but it is more reliable.

ASC Trend

The ASC Trend indicator is a custom indicator which provides trade entry signals based on breakouts. It prints arrows on the price chart to signify an entry signal pointing towards the direction of the trend reversal.

This indicator is very simple yet very effective. Although it is not perfect, it tends to produce an accurate entry signal. It is even more effective when paired with a complementary indicator which could help filter out bad trades.

Trading Strategy

This strategy trades on swing points based on the Zero Lag MACD trend reversal signals.

However, instead of taking every trend reversal signal that is presented, this strategy filters out trades that goes against the flow of the long-term trend. The 200-period Simple Moving Average (SMA) will be used as the long-term trend filter. Trades will only be taken in the direction of the trend based on the 200 SMA. Trend direction is filtered based on where price is in relation to the 200 SMA and the slope of the 200 SMA.

On the Zero Lag MACD, trend reversal entries will be based on the crossing over of the histogram bars from negative to positive or vice versa. On the other hand, trade exits will be based on the reversal of the Signal Line towards the middle of the Zero Lag MACD range. This allows traders to enter on a confirmed trend reversal and exit early at the start of a probable mean reversal.

Finally, the specific entry candle will be based on the ASC Trend indicator. This would allow traders to have an accurate entry, which is confirmed by a momentum-based reversal.

Indicators:

  • 200 SMA
  • ZeroLag_MACD.ex4 (default setting)
  • ASCTrend_BO.ex4
    • RISK: 9

Timeframe: 4-hour and daily charts only

Currency Pairs: major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price should be above the 200 SMA line.
  • The 200 SMA line should be sloping up indicating a bullish long-term trend.
  • The Zero Lag MACD bars should cross above zero indicating a bullish trend reversal.
  • The ASC Trend indicator should print an arrow pointing up indicating a bullish entry signal.
  • These bullish trend reversal signals should be closely aligned.
  • Enter a buy order on the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal below the entry candle.

Exit

  • Close the trade as soon as the Zero Lag MACD signal line starts curling down towards the midline.

Advanced MACD Swing Forex Trading Strategy 1

Advanced MACD Swing Forex Trading Strategy 2

Sell Trade Setup

Entry

  • Price should be below the 200 SMA line.
  • The 200 SMA line should be sloping down indicating a bearish long-term trend.
  • The Zero Lag MACD bars should cross below zero indicating a bearish trend reversal.
  • The ASC Trend indicator should print an arrow pointing down indicating a bearish entry signal.
  • These bearish trend reversal signals should be closely aligned.
  • Enter a sell order on the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal above the entry candle.

Exit

  • Close the trade as soon as the Zero Lag MACD signal line starts curling up towards the midline.

Advanced MACD Swing Forex Trading Strategy 3

Advanced MACD Swing Forex Trading Strategy 4

Conclusion

This trading strategy is one that works very well. It is not perfect, but it does work well. It produces high probability trade setups that would result in a good win ratio.

Although this strategy is very systematic, it would also help to have a confluence of other factors that could support the trade. It could either be breakouts of supports and resistances, confluence with a higher timeframe trend, or divergences. These confluences improve the probability of the trade setups much further.

Although there are times when price would surge resulting in huge gains, there will also be times when the gains are not that big. On these scenarios, it is best to stick to the plan instead of allowing greed to cause you to hold the trade too long.

There are also times when the exit signal from the Zero Lag MACD signal line is a bit too early and could cause traders to exit the trade even before the end of the trend. Conservative traders should exit trades whenever the signal line is showing signs of reversal. However, aggressive traders could opt to hold the trade even longer until it is clear that the market is reversing.

 

Heiken Ashi Smooth Trend Trading Strategy

Trend trading is also one of the types of strategies that could be applied when swing trading. It is not only doable, but it also has the most potential to produce huge gains in just a few trades.

Although attempting to catch trades that would result in huge trends is quite difficult, there is always a probability that the next trade you take may be that big trend that you are aiming for. Not only that, there are also ways to improve your chances of catching those huge waves.

One way of improving the probability of catching a huge trend is by using reliable indicators that keeps up with trends and trend reversals effectively. Trading on confluences of these indicators often produce trade setups that not only produces high reward-risk ratios but also an improved win ratio.

Heiken Ashi Smoothed

The Heiken Ashi Smoothed indicator is one of the most reliable trend indicators available for most traders. It reverses when the market has clearly reversed and stays with the trend until it has clearly ended.

The Heiken Ashi Smoothed indicator is a version of the Heiken Ashi candlesticks. Both indicators draw candles which change colors only when the trend has reversed. However, their similarities end there.

The regular Heiken Ashi candlesticks is more closely associated with the regular candlesticks, while the Heiken Ashi Smoothed indicator closely resembles the behavior of moving averages. In fact, the Heiken Ashi Smoothed indicator is derived from the Exponential Moving Average (EMA).

Awesome Oscillator

The Awesome Oscillator is a momentum indicator which indicates trend direction as an oscillating indicator.

This indicator displays histogram bars to indicate trend direction. The bars are based on the difference between the 5-period Simple Moving Average and the 34-period Simple Moving Average. These moving averages are based on the median of the candles instead of the close of the candle.

Positive bars indicate a bullish trend while negative bars indicate a bearish trend. Crossovers from negative to positive or vice versa are indicative of a trend reversal.

The bars also change colors depending on whether its value is bigger than the previous bar or not. Green bars indicate that the current bar has a bigger value than the previous bar, while red bars indicate that the current bar has a smaller value compared to the previous bar. In a bullish trend, green bars indicate that the trend is gaining momentum while red bars indicate that the trend is contracting. The opposite applies in a bearish trend. Red bars indicate momentum, while green bars indicate contraction.

Trading Strategy

This strategy trades on trend reversal signals based on the Heiken Ashi Smoothed indicator.

Trade signals are filtered based on the long-term trend as indicated by the 200 Simple Moving Average (SMA). This is based on the location of price in relation to the 200 SMA, as well as the direction of the slope of the 200 SMA.

Aside from the 200 SMA, trades are also filtered based on the trend direction as indicated by the Awesome Oscillator. Trade signals produced during an established trend as indicated by the Awesome Oscillator tend to have a high probability. However, there are also trade entries based on the confluence of trend reversal signals coming from the Awesome Oscillator and the Heiken Ashi Smoothed indicator that work well. This strategy however trades on existing trends as indicated by the Awesome Oscillator.

Indicators:

  • 200 SMA
  • Awesome Oscillator
  • Heiken_Ashi_Smoothed.ex4 (default settings)

Timeframe: 4-hour and daily charts only

Currency Pairs: major and minor pairs

Trading Session: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • Price should be above the 200 SMA.
  • The 200 SMA should be sloping up indicating a bullish long-term trend.
  • The Awesome Oscillator bars should be positive indicating a bullish trend direction.
  • The Heiken Ashi Smoothed candles should change to blue indicating a bullish trend reversal.
  • Enter a buy order upon the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal below the entry candle.

Exit

  • Close the trade as soon as the Heiken Ashi Smoothed candles change to red.

Heiken Ashi Smooth Trend Forex Swing Trading Strategy 2

Sell Trade Setup

Entry

  • Price should be below the 200 SMA.
  • The 200 SMA should be sloping down indicating a bearish long-term trend.
  • The Awesome Oscillator bars should be negative indicating a bearish trend direction.
  • The Heiken Ashi Smoothed candles should change to red indicating a bearish trend reversal.
  • Enter a sell order upon the confirmation of the conditions above.

Stop Loss

  • Set the stop loss on the fractal above the entry candle.

Exit

  • Close the trade as soon as the Heiken Ashi Smoothed candles change to blue.

Heiken Ashi Smooth Trend Forex Swing Trading Strategy 3

Conclusion

This strategy is the type of strategy that could produce huge gains in just a few trades. However, there are also trades that could reverse right away resulting in small gains or losses. In the long run, this strategy should result in a decent win ratio with a high reward-risk ratio.

Trailing the stop loss to protect gains is also very useful with this strategy. This allows traders to avoid giving back profits to the market. One technique would be to trail the stop loss a few Heiken Ashi candles behind the current candle.

Manual exits based on the behavior of price action would also be very beneficial. This is probably the most efficient way to exit trades, however it takes a lot of practice and experience to master exiting trades based on price action.

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