Swing Trading is a Challenge - Part 1

The idea behind swing trading is pretty clear. First of all, you need to judge for yourself about whether your mindset is built for swing trading. Trading is as much about yourself as it is about trading as such. You need to find out a way of trading, a strategy that works for your personality.

It took me several years to understand this. I had a take a hard look about myself, who i was, what my mindset was, what kind of a person i am etc. and then had to slowly come up with a plan that worked for me. The first few years of my trading was spent coming up with a great plan but my personality did not suit it and so it went bust. Then i came up with a plan which suited my personality but the plan was bad and it went bust again. So, the key is find a good plan to suit your personality or come up with a good plan and then adjust your personality according to it. These are 2 totally different things.

Lets face it. Most of us start forex trading because we want more money....We want money and enjoy the good life. I started out the same way too. Most of the people who start this way are very impatient. They dont have a plan and they basically trade whatever they want to. And they are impatient. They quickly open and close trades so that they can make money or lose money quickly. They need instant results. But you seldom get good trading strategies in 1M or 15M timeframes. Of course, there would be a few but they are too few compared to thousands of failed strategies. So, to suit the mindset, they try to come up with strategies on 1M or 15M which invariably fail. So, here in this case, they did come up with a strategy to suit their mindset but the strategy was bad and bound to fail. This failure was due to 2 reasons. First, there simply arent enough good strategies on 1M and 15M timeframes and it takes a lot of effort and time to come up with a good one in those timeframes. Second, as a newbie, traders simply dont have the patience to follow the good ones that come by....(contd. in next post)

Back Again!!

Back after an extended break, i have to say. My business commitments became too much and so i had to take a break as i did not have time for blogging or even to be on the forum at FF....now, the businesses have been setup very nicely and moving smoothly and that gives me some time to start blogging again on my favorite subject, forex...so lets get started again...i will discussing a new swing strategy...very easy for anyone to follow...it is one of the many that i use for my trading....

A Simple Euro Chart

Hello All,
Lets start off this new round of blogging with a simple, straight forward daily chart of EURUSD. Many traders like to overcomplicate things but i like to keep things simple and clear. So, as attached, you have a daily chart of EURUSD with a fibo of the last swing plotted on the chart. I always prefer a fibo of the last swing on the chart rather than any earlier ones and i always draw the fibo in the direction of the swing. If the swing, as in this case, is from top to bottom, i start the fibo from the top and draw it to the bottom.

Now, you can see why it is important to keep the chart simple. It is very clear now that after a 2 day struggle to overcome the 38.2 of the last swing, the euro has finally had a breakout from the region and has crossed the 38.2. Now, all we need to do is wait for Monday London session to see whether the 38.2 is still holding and if yes, take a long. The Target? the 50% of the last move which comes in around 1.4030. We can see a whole lot of resistance there and so it is indeed a very good place to exit your longs and initiate some small shorts in expectation of a retracement. Why small? Cos the trend is up and you dont want to be betting huge lots on a counter trend trade.

So is that all? Yes , indeed. It may sound simple but that is all there is to it. But remember, analysis is always easy. Trading isnt....

EUR/USD

Here is an hourly chart of EUR/USD over the last week. As we can see lots of volatility this being due to fundamental data changing on an almost daily basis.

The chart should be fairly self explanatory. 2 big control bars CB1 and CB2 controlled the action at the start of the week. Notice the close of CB2 around 1.4200 continued to act as ongoing support and resistance level even after price closed outside it.

CB3 closed beyond previous support effectively taking out the longs and now prior support acts as resistance. Now CB4 and CB5 indicate current demand levels. CB1 shows supply along with CB6.

Looking at the bigger picture for the last week EUR/USD has been in a clear down channel and the overnight break out of the channel has clearly failed. Notice also price divergence from the RSX indicator. With divergence that doesn't mean an immediate reversal but you should keep your eyes peeled for a reversal signal. Sure enough there is a large inverted hammer during the early London session today which encourages all the longs to exit. Note the open of CB3 occurs very close to the close of CB1

Fundamental or longer term traders would have found the last week very tricky to trade but you can see how identifying key Bars/Candles on this hourly timeframe it's possible to understand why PA moved the way it did.

Good trades to all.

Villonius

A new Co-author

I am very glad to introduce a new co-author, a trade from UK who has done a lot of analysis on control bars and wide range bars ever since we started. I have been very impressed with his work and hence had requested him to join as co-author and he has been very kind to accept the invitation. He will be known as Villonius and below are some of his details :

Experience : 15 months

Markets : Forex Mainly EUR/USD and GBP/USD

Methodology : Chartist, Identifying Supply and demand levels on 15 min and 1 hr Time Frames Divergence analysis on 1 hr and 4 hr TFs

Influences : Sam Seiden and Robert Miner



I am sure that you will find all his articles to be very very useful.

Update on the Euro control Bar

Here is a short and quick update on the euro control bar which i had posted earlier. I had said that the ends of the bar were at 1.4225 at the top and the bottom was at 1.4150....Look at the updated hourly chart that i have posted. Look how price came back exactly to the low of the bar to test it and then went right back up. If you had entered close to the low, as i did, at around 4155, you could have easily made 150 pips by now. I took off 107 pips.

Even if you had missed the bottom of the bar, look at the top of the bar that has been marked. Look at the 15M chart that i have attached. Look how price broke the top, retested the top and went right back again. A trade that could have fetched 70 pips easily. All for a DD of less than 10 pips !! Amazing...Isnt it ?

US Bebt Ceiling Raised and we move on to more fundamentals

This week is packed with fundamentals with rate decisions and leading indicators. With Debt ceiling issue behind us we will be looking at UK Services PMI. If that disappoints to the downside, we may see GBP/USD break the Monthly Pivot break from where it bounced off yesterday. There are also Portugal Bond Auctions to be aware of at 9:30 GMT. Depending on the result, it may drive risk aversion or appetite.
All the best!