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Yes, Give it to me

Swing Trading Techniques That Work 

Last Updated: August 13, 2020

By Rayner

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In today’s episode, you’ll discover 5 useful swing trading techniques that work and could get you results, fast.

So listen to it in now…

Resources

Swing Trading Strategies That Work

The NO BS Guide to Swing Trading

The Complete Guide to ATR Indicator

Transcript

Hey, hey, what’s up my friend?

In today’s episode, I want to share with you 5 swing trading techniques that work.

What’s swing trading

Before we get to the techniques, let me briefly explain what swing trading is, because some of you might be unfamiliar with this term. Swing trading refers to capturing swings in the market since the market doesn’t go up in one straight line.

For example, in an uptrend it swings up, then retraces, then makes another swing higher, pulls back, then heads higher, and pulls back again, and so on. This is what we mean by swing trading, basically trying to capture that one swing in the markets.

So here are a few tips and techniques I want to share with you.

Technique #1: Look for a power move into a level

Let’s say I want to buy at support, I’m looking for a power move or a strong momentum into support. The larger and the more bearish the candles are, the better it is.

I like to see strong, big bearish candles coming into support instead of candles looking like a stair-stepping price action into support. Why am I looking for a power move?

Because when the market drops fast, the reversal could be equally swift in the towards the upside. That’s why I look for a power move.

I don’t want to see a stair-stepping move into support, for example, a series of lower highs into support and I know that trade is going to be difficult because all the previous swing highs are potential levels on the chart where selling pressure could come in.

Those swing highs are where short traders might look to sell and those are obstacles that I have to overcome as a buyer.

Instead, if there’s a power move into support, and the recent swing high is very far away, this means when I trade a reversal, there’s huge profit potential as the market swings back up higher in my favour with little to no obstacles.

So the first thing I look for is a power move.

Next…

Technique #2: Place a stop loss at a logical level

This applies to any type of trader essentially. You don’t want to blindly put your stop loss just below the lows of support. Why is that?

Because that level is where most traders will set their stop loss and what a market could do is that it swings down into support, take out the lows and then reverses. So those traders who put their stop loss just below support are going to get stopped out.

And when the market reverses back in their original intended direction, they are no longer in the trade because they got stopped out earlier. If you don’t want this to happen to you, then set your stop loss with a buffer below support. Give it some room to breathe.

If you want to know how much buffer to set, you can use your ATR indicator, find out what’s the ATR value of the market that you’re trading, and let’s say support is at $1.50. The ATR value is $0.10, you can set it at $1.40, which is a $0.10 buffer below the lows of support.

Technique #3: Set proper profit targets

As a swing trader, how do you set proper targets? You’re essentially looking to capture one swing in the market. So you want to buy support and sell at resistance, and stick to one swing.

A mistake that many swing traders make is that they set their targets at unreasonable levels. They set their targets above resistance because they want to justify the risk-reward on the trade.

Maybe they’re looking for a minimum of 1:3 risk-reward ratio, and their target needs to be above resistance. But does it make sense? It doesn’t quite make sense because resistance is an area where potential selling pressure could come in, and push the market lower.

If you set your target above resistance, you are reducing the probability of you exiting at a profit because you’re putting your target at an unreasonable level where the price has to break out of resistance to finally to finally reach your target.

You’re making the market work very hard to justify your potential 1:3 risk-reward ratio. Forget about your minimum 1:3 risk-reward ratio and stuff like that. When you set targets, you must set it at a logical level.

Let’s say $2 is an area of resistance. Don’t put it at $2.10, $2.20 or $2.30. Instead, be conservative and set it at $1.95 or $1.90, give that market a little bit of room.

Because remember, support and resistance are areas on your chart and the market may or may not reach $2 before it reverses. It could go up to $1.93 or $1.94 and then reverse from there. That’s possible.

This is why your targets should be set slightly below resistance. Makes sense?

Next…

Technique #4: Know the behaviour of the markets that you’re trading

In the previous episode, we talked about AUD/CAD being a mean-reverting market. As a swing trader, this is useful to you because the AUD/CAD tends to find resistance at its previous day high, so you can look for selling opportunities at those levels.

And then you could possibly look to take profit just above the previous day low. Using statistics in the market to help you make better trading decisions is one way to go about it.

So, know the behaviour of the market that you’re trading. Is it a mean-reverting market that you’re trading? Meaning, does it tend to find support or resistance at the previous day or week high or lows?

Or is this a trending market where whenever it breaks above the previous day high, it tends to continue higher?

Once you know the characteristic of the markets that you’re trading, you can make better trading decisions from there.

And lastly…

Technique #5: Scale half, ride half

Let’s say you spot a swing trading opportunity on the 4-hour timeframe, maybe it’s a false breakout at support.

And on a daily timeframe, you realized that the market is in a volatility contraction, meaning the on the daily timeframe, the range of the candles are very tight for the last 10 days, it didn’t move, and it’s in a tight consolidation.

What this means is that on the daily timeframe, this market is about to make a big move, maybe higher or lower, it’s anyone’s guess. But there’s a big move coming.

And let’s say the daily timeframe is in an uptrend, there’s a good chance the market could breakout higher. So on the 4-hour timeframe, you got an entry on the false breakout of support.

But in the back of your mind, you know that on the daily timeframe, the market could explode higher, and you still want to capture a piece of the move.

So how do you do that? How do you kind of reconcile the difference between capturing a swing, while at the same time not wanting to miss a big move that could possibly occur soon?

What you can do is that let’s say you bought at support on the 4-hour timeframe and the market moves into your favour, then once it reaches a resistance, you can look to exit half of your position.

Let’s say you buy 10,000 units of EUR/USD, then you can sell 5,000 units at resistance and you’ll have a remaining of 5,000 units.

At this point, the price is now at resistance, it could retrace lower, consolidate or go back to the entry point. It doesn’t matter. You’ve already booked your profit on the first 5,000 units.

As for the remaining 5,000 units, you want to hold it and see if the market can breakout of resistance and continue the existing uptrend that you have seen earlier on the daily timeframe.

Because if that occurs, that remaining 5,000 units could allow you to ride a huge trend, especially if the trend now is on a higher timeframe trend, which is the daily timeframe.

You can see that your potential profits are going to be much more massive because now you’re riding the wave on a higher timeframe trend. Make sense? This is what I mean by scale half, ride half.

This is another technique to help you capture a swing, while at the same time having a portion of a position remaining to ride a trend. This will really make sense especially if your higher timeframe is in a consolidation or in a buildup and getting ready to make a big move.

Sounds good?  

Let’s do a quick recap.

Recap

  1. Look for a power move into support or resistance and then trade the reversal after the power move.
  2. Set a reasonable stop loss – don’t set your stop loss right below support or just above resistance as it makes you prone to getting stop hunted. Give it more buffer using 1 ATR above the highs or 1 ATR below the lows.
  3. Set a reasonable target – if you’re buying support and you want to sell at resistance, set it your target just below resistance as you’ll have a higher chance of making a profit.
  4. Understand the market behaviour that you’re trading, is it a mean-reverting market or a trending market.
  5. Scale half, ride half – if you want to catch a swing and ride the trend at the same time, then exit half of the position at your first target (a swing high or resistance) and then ride the remaining half to see if the market can breakout or move further in your favour.

With that said, I have come to the end of this episode, and I will talk to you soon.

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