TRANSITIONING FROM DAY TRADING TO SWING TRADING

Forex Trading has become a very popular means of earning income by individuals all around the world, ever since the market was opened up for Retail Trading several years ago. Those who have been successful in this challenging market have done so by Scalping, Day Trading or Swing Trading the major Currency Pairs each month, with a wide range of trading strategies. As lucrative as Scalping and Day Trading have proven to be for most of these traders, many have chosen to move away from these shorter term strategies in favour of the larger trends of Swing Trading. This style of trading is not as aggressive nor as exciting as the other strategies, but provides less exposure to market volatility and is a flexible, practical option for those with a non-Forex full-time job.

Despite the intention to trade the market with this new approach, however, many have found the transition very difficult given the new way of thinking that successful Swing Trading demands. The previous habit of analyzing the market and expecting a profitable move each day or week may create unrealistic expectations. One may also find it difficult to allow trades to move towards their targets without a micromanagement approach that was required in previous strategies. If, however, the trader were to practice and implement the following safeguards in a disciplined manner on a regular basis, a successful transition to Swing Trading will be realized.

OPEN UP ARBITRARY TRADES

On a Demo Account, open a position on two uncorrelated pairs and leave them for 7 days or until they are closed. This can be based on a strategy that you have already identified to use before going Live or a random selection if you are searching for that ideal strategy. Only check on the trades at the end of each day at 5 00 pm EST. 

Ensure that all charts related to the trades are closed as well as anything that allows you to see the value of the trade/Account Balance. You should only be able to see that the trades are still open by viewing an Open Position tab on your platform such as this one;

This will allow you to become accustomed to the time it takes for these trades to reach their targets, without the pressure of a Live Account. You will also appreciate that despite the longer holding period for these trades, a few days can go by in the blink of an eye.

CLOSE THE SMALLER TIME FRAMES

The temptation to look at the daily movements of the market will follow new Swing Traders, depsite knowing the greater accuracy of the Larger Time Frames. To overcome this problem, the trader MUST close all of the Time Frames below the ones chosen for Swing Trading (generally 4 Hour Charts and higher are used). This will gradually reduce the impulse to constantly check on a trade because of small movements that have little bearing on the major trend direction.

STOP FOLLOWING THE NEWS

Yes, you read that correctly. Economic news released to the market each week can cause spikes and heightened volatility that can be very profitable for Day Traders within minutes. However, these reactions tend to be incorporated into the signals that are seen on the Higher Time Frames at the end of the day. You simply analyze the market in the context of this signal and then trade accordingly. 

Once the setup is clear enough, you can make your trade decision without concern about the nature of the data nor the reaction of the market earlier in the day. It is even more important to not follow market news while the trade is in motion so that you don't second-guess yourself based on minor news items. As you pay less attention to these releases, you will realize that the most profitable swing trades do not require an awareness nor an understanding of the underlying economic fundamentals.

TRUST YOUR STRATEGY

As with most things in life, once a system has been proven itself to be good enough to be implemented, it will work on most occasions. Trust that your Swing Trading system will continue to work for you as it did on a Demo Account. It does not have to be accurate 100% of the time to be profitable so you just have to allow the winning trades to compensate for the losing ones. The habit of monitoring trades and exiting early because of a temporary pullback will only compromise the long-term profitability of the strategy. Trust your strategy, stick with it and it will reward you each month with large rates of return.

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Duane Shepherd

(M.Sc. Economics, B.Sc. Management and Economics)

Currency Analyst/Trader

Contact: shepherdduane@gmail.com

Twitter: @WorldWide876

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Website: www.drfxswingtrading.com