News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Mixed
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • What's the difference between leading and lagging indicators? Find out from here: https://t.co/vGx8HCagF5 https://t.co/4DGXwA8vqs
  • Struggling to define key levels? Floor-Trader Pivots assist traders in identifying areas in a chart where price is likely to approach and can be used to set appropriate targets, while effectively managing risk. Learn how to use this indicator here: https://t.co/Ye4m1FMKUW https://t.co/mAMhWbV6Jy
  • Make smart trading decisions with your free guide to trade the news. Download your free guide here.https://t.co/pb5E2KgRzW #DailyFXGuides https://t.co/E9ZmJvqO0z
  • Currency exchange rates are impacted by several factors. Are different world leaders a contributing factor? Find out here: https://t.co/4jsORznRTE https://t.co/fqxw1AoKc1
  • Gold snapped a two-week losing streak but keeps price within the broader August downtrend. These are the levels that matter on the $XAUUSD weekly chart. Get your market update from @MBForex here: https://t.co/B3Jct6mIBD https://t.co/xTGIM2hRBv
  • $GBPUSD continues to move higher, despite Friday’s weakness, as vaccination hopes continue to fuel positive sentiment despite ongoing lockdown fears and downbeat UK data. Get your market update from @nickcawley1 here: https://t.co/S8UoHzOwFN https://t.co/qI6UZdggvM
  • Risk management is one of the most important aspects of successful trading, but is often overlooked. What are some basic principles or risk management? Find out from @PaulRobinsonFX here: https://t.co/IsnpfJhp91 https://t.co/6wxX6oQurn
  • Recessions can devastate the economy and disrupt the fortunes of individuals, businesses, and investors. But economic decline in the business cycle is inevitable, and your trading can be defined by how you respond to crisis. learn how to prepare here: https://t.co/e4CnobJCss https://t.co/w009tJEQZn
  • Looking for a new way to trade reversals? One of the most used reversal candle patterns is known as the Harami. Like most candlestick formation patterns, the Harami tells a story about sentiment in the market. Get better with trading reversals here: https://t.co/rfwUWJfbz9 https://t.co/2AeO1AdD2M
  • MACD who? The Moving Average Convergence Divergence (MACD) is a technical indicator which simply measures the relationship of exponential moving averages (EMA). Find out how you can incorporate MACD into your trading strategy here: https://t.co/ZNs4Qi8ieG https://t.co/INJz4NSugQ
How to Catch Swings in the Forex Market

How to Catch Swings in the Forex Market

James Stanley, Strategist

Talking Points:

  • Traders can use price action to look for swings in the marketplace.
  • Indecision can highlight potential areas of swing on the chart.
  • Swings can be attractive because of the potentially beneficial risk-reward opportunities.

Of all of the different ways that traders can approach speculation in markets, Swing Trading has to be one of the more interesting.

Scalping or day-trading is largely dependent on momentum. Longer-term trading is generally dependent on data flow or macro-economic events. But swing traders generally have a plethora of opportunities, whether markets are in long-term trends or not.

We discussed this style of trading with recommendations for time frames to utilize and entry protocols in the article, The Four Hour Trader. In this article, were going to take a closer look at the types of price action events that will often take place at these swings, giving the trader the opportunity to implement a strong risk-reward ratio on the entry of the trade.

The Benefit of Price Action as an Indicator

New traders will often ask what drove that move in EURUSD? Or Why did Sterling go down? And if you look hard enough, you can almost always find a reason. Most of the financial media makes a living on the explanation behind those reasons. But the fact-of-the-matter is that this hindsight type of analysis is really simple after-the-fact; but rarely relevant before-hand. And as traders, we need to be in the position before the reasons take place, so this type of hindsight is relatively worthless.

Almost every price movement in market can be boiled down to once simple factor: Supply and Demand; thats it.

If there are more buyers than sellers, then price will go up. And if there are more sellers than buyers, price will go down. This relationship is exactly why markets work. Prices reflect what the market is willing to pay.

Changes in Supply and Demand create price movements

How to Catch Swings in the Forex Market

Created with Marketscope/Trading Station II; prepared by James Stanley

This is why technical analysis can be so valuable: It can strip out the whys’ and focuses on the what.’

One of the downsides of technical analysis is that most indicators are lagging the market, so it just obscures traders from the current supply/demand impact on the market; and this is why price action can be so incredibly valuable.

Price action, or the study of analyzing price and price alone in a traders analysis is one of the most pure ways of performing technical analysis because it does not include any indicators that are lagging the market. If youd like to become more familiar with the study of price action, the article Four Simple Ways to Become a Better Price Action Trader can certainly help you get started. And for more advanced study, The Forex Traders Guide to Price Action can take that education a step further.

Using Price Action to Catch Swings

Because price action is giving traders a direct view of the supply and demand in a market at a given point in time, traders can potentially get an early indication that a swing or reversal in prices may be near.

When market display indecision, this is showing that supply and demand is roughly equal at that moment in time. This will often show as a series of candlestick formations such as the Doji , or Spinning top formation.

Indecision formations highlight potential turning points

How to Catch Swings in the Forex Market

Taken from The Most Important Price Action Formation is Indecision

But this indecision may take a while to play out before prices actually reverse in the other direction. In many cases, multiple spinning tops or dojis can show up before prices actually reverse. But the benefit of this prolonged period of indecision is that it highlights to traders that the supply or demand in that pair may be at a turning point.

In the article The Most Important Price Action Formation is Indecision, we look at a variety of different indecision candlestick formations that can potentially clue a trader into an upcoming reversal period.

Perhaps most importantly with indecision and swing-trading formations, traders can look for strong risk-reward ratios in an effort to avoid the Top Trading Mistake of losing so much when wrong; and making so little when correct.

--- Written by James Stanley

James is available on Twitter @JStanleyFX

Are you looking to take your trading to the next level? The DailyFX 360° Course offers a full curriculum, along with private, weekly webinars in which we walk traders through dynamic market conditions using the education taught in the course.

You can get a demo account completely free of charge to test this, or any strategy without the risk of financial loss. You can generate a new demo account with FXCM by clicking HERE.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES