The swing trading strategy combines both the fundamental and technical analysis methods. While new traders may wish to try swing trading, it is recommended for experienced traders due to the need for quick judgements. This strategy also requires a great deal of additional analysis when compared to other strategies. This article will provide a breakdown of a day in the life of a swing trader on the foreign exchange market.
The retail swing trader will usually begin his day at 6am EST. It is essential for the trader to begin at this time in order to gain a feeling for the day’s market and find potential daily trades. He must also create a daily trade watch list and examine current open positions. These tasks will be discussed in more detail below:
1. Examining the forex news market
The first task to complete is to catch up on the most up to date forex news and developments in all trading markets. All this information is available online via news websites. When reviewing these sites the trader should focus on three important features:
- All current holdings
- The overall market sentiment
- The different sector sentiment
2. Finding potential trades
After examining forex news, a trader must scan the forex trades for any potential trades. When trading a swing trader will enter the position with a fundamental catalyst and exit it using technical analysis or indicators. There are two methods with which a trader can find fundamental catalysts.
- The special opportunities. These opportunities are best found by monitoring SEC filings such as S-4 and 13D. This information can be found using such sites as SECFilings.com. These sites will send notifications to the trader when a filing and special opportunity is found. It should be noted that these opportunities carry great amounts of risk but they can deliver large profits if traded effectively.
- The sector play. These opportunities are best found by analysing the forex news and/or consulting reliable financial information sites. These types of plays will often see swing traders placing trades at the best moments during trends. The trader will then ride the trend until there are signs of a reversal or retracement.
3. Checking current positions
A trader must check current open positions in order to ensure upcoming forex news will not affect the trade. It is recommended that the trader close positions before forex news is released. If the trade is not closed then it must be adjusted.
Forex news trading hours
During trading hours a swing trader will watch and trade on the market. The majority of swing traders will look at level II quotes to discover who is trading and what is selling currencies. These level II quotes will also indicate what amounts are being traded.
Once a swing trader has been entered, it is time to search for an appropriate exit. This is generally done using technical analysis and Fibonacci extensions. Ideally this should be done before the trade to save time. Adjustments can be made to accommodate movements on the market, but these adjustments must never be made to take on more risk.
The after-hours period is used as a time of performance evaluation. The trader will review open positions and examine all trades in the trading journal.