Swing strategy

Swing trading strategies focus on capturing a portion of a larger move by trading shorter term legs of longer term trends. Swing traders enter trades at points where price action changes direction - they look for pullbacks in trends and then identify price points where pullbacks are likely to end with a view to get on board at that 'swing' or reversal point to take advantage of the next leg higher.

Swing strategies can include:

• simple pullbacks such as abc price action
• more complex pullbacks such as diamonds and butterflies

Generally swing trades are taken from daily charts, although more complex pullbacks can form over a longer time frame. The following is an example of an simple swing trading setup. Price makes a high in an uptrend and then retraces in an abc type pattern.  A swing low is formed and an entry taken on the break of the swing low candle formation.

Swing strategies might suit people who:

• have the time to analyse price action and identify potential swing points
• have the patience to wait for an entry trigger
• like having stops closer to their entry point
• have the time to review charts more regularly - reversal patterns can form easily in a day
• enjoy using technical analysis tools such as fibonacci and price and time analysis
• don't have time to sit and watch the markets all day - conditional orders can be placed to enter if certain criteria are met, however, smaller time frame charts can be used and traders can watch charts throughout the day

Let's take a closer look at a possible swing trading strategy and how to develop a trading plan to capture these trades.