Swing trading is a strategy which aims to take advantage of price spikes to the upside or downside, where a trader looks to buy when prices become oversold and sells when they become overbought, looks for prices to return to fair value. Swing trading is easy to learn and will always work, because human nature never changes.

A typical swing trade will last for around a day or two to a week and is more popular than ever with traders due to its profit potential and easy to learn logic.

The Logic of Swing Trading

All market prices including those in Forex are decided by humans and its a fact that humans will always push prices to far to the upside when greed is present and to far to the downside when fear is present.

If you look at currency charts you will see numerous spikes to the upside or downside, where prices accelerate away from the prevailing trend. These price spikes quickly fade as greed or fear climax and prices fall back to fair value.

How to Trade Price Spikes for Profit

If you want to engage in currency swing trading you should keep the following in mind when looking to generate your trading signal. In the example below, we will look at a market which has been pushed to far to the upside but the same logic will work in a bear market.

1. Look for an accelerated up turn in price on increased volatility and look to see how overbought the market has become.

2. Check to see how overbought the market is and to do this, you can use some momentum oscillators. There are many to choose from but just use a couple to help you see how overbought the market is and they will give you the situation visually. Our favourite oscillators to use are – the MACD, Stochastic, RSI and ADX so look them up and you will find more details on all of them on this site.

3. Once you have established momentum is overbought, you need to then wait for momentum to diverge from price and as soon as momentum diverges from price, look to get short.

4. Once you are in the market immediately, place a stop above resistance and pick a level of support, you think the price will test and take your profit just above this level.

Swing Trading the Ideal Strategy for Novices and Savvy Pro Traders

Swing trading is every easy to learn, understand and apply and will always work because humans will always push prices to far to the upside or downside, when greed or fear are present and this can give you some great currency trading profits.