Hi Everyone,
Im FXBen and this is my first thread on BabyPips. i Have been trading a number of years now and have been fortunate enough to spend some time with some great traders including former Hedge Fund and Investment Bank traders. I always like to keep and eye on here as i think its a great place for everyone to learn and make money together as a community and its about time i shared something of my own!
MY SWING TRADING STRATEGY
Firstly you will need your charts set up as follows.
24 MA (Blue)
72 MA (Red)
Daily Timeframe
Now i must point out that when entering a trade i focus heavily of price action from Support/Resistance levels along with Fibonacci plays so if you haven’t yet i suggest you study hard in the BabyPips candlestick and fibonacci sections. Moving Averages (MA) are probably the most commonly used technical tools in Forex trading but it has become apparent to me that people seem to use MAs of a particular number without really knowing the meaning behind that number. For example the 20, 50, 100, and 200 MA are the most common setting but do you know why? theres is no reason why. they are just figures that have been marketed by brokers and as a result people think they are the ‘right’ settings to use.
You will see above that i use the 24 and 72 MAs and i do so for a very particular reason. My swing trading approach means i focus on the Daily Timeframe so the MAs refer to the price average of the last 24 and 72 days. This means that my MAs are showing me the average price for the last 1 and 3 months of trading (6 trading days per week in the FX market). My MAs are now giving me real value showing me the current market direction and bias for that pair.
Now you understand why i use these settings lets get in to how i incorporate them in to my approach. Firstly, i do not buy or sell when they cross. I simply use them to indicate which direction i should be trading in. So if my 24 crosses the 72 to the upside it indicates i should be looking for longs. Once i know the direction i am looking to trade i simply wait for a good quality Price Action setup which i can then jump in on. Ill give you an example below.
As you can see price broke trend and we had a Bullish MA Cross suggesting longs. We then waiting for the right price actions off support before entering long. When it comes to placing stops you have 2 options. The way i usually play it to be as tight as possible is to wait for the entry signal off the Support/Resistance level of fibonacci and then simply place my stop above or below that level it has reacted from ensuring i am clear of any spiking wicks that had formed and giving some breathing room of normally around 10 pips. If you wanted to give it extra breathing room you could simply place behind the most recent high or low. To implement good risk management i usually close half the position at a 1:1 risk reward ratio meaning even if the trade reverses from here i cannot lose the trade. If the trade has also moved a good number of pips its not uncommon for me to the move the stop to break even guaranteeing the trade as a win. At 2:1 i will then close another 25% of the trading meaning we now cant lose this trade even if the stop was still where i originally placed it. I will often then trail my last 25% of the position by moving the stop along behind the high lows or lower highs (depending on direction) to attempt to catch any real long term runners.
If you are looking at a pair and find that you are in a strong current trend then i simply waiting for a pullback to provide an opportunity to enter that trend. This could be in the form of a counter trendline forming or some more support/resistance being broken and retested. Keep an eye out for any fibonacci stops as well. Below are some examples.
I hope this helps and if you have any questions please feel free to leave them below and i will be happy to answer them. 