Lecture Notes: Swing Trading - February 2017 Lesson 1
Introduction to Swing Trading
- Definition: Trading predictable price movements with a high degree of consistency.
- Objective: Buy in bullish conditions; sell short in bearish conditions.
- Duration: Intermediate-term trading with trades lasting 2 weeks or longer.
Goals of Swing Trading
- Capitalize on Market Moves: Focus on larger entities causing price displacements.
- Potential Rewards: Trade objectives can reach 200 to 500 pips.
Ideal Swing Trading Conditions
- Market Suitability: Not all markets are ideal for swing trading.
- Market Rotation: Opportunities change every three months.
- Market Profiles: Avoid lackluster markets with little movement.
Types of Market Profiles
- Consolidation: Range-bound; avoid for swing trading.
- Trending: Indicates large flows and directional movement.
- Reversal: Signals change in market direction.
Strategy for Swing Trading
- Timeframe Analysis: Use monthly and weekly charts to identify trends.
- Avoid Range-Bound Markets: Look for markets moving out of consolidation.
- Institutional Interest: Trending markets suggest participation by major players.
Execution
- Setup: Identify trends on monthly/weekly charts; execute on 4-hour charts.
- Directional Focus: Align trades with long-term trends to increase success probability.
Analyzing Trending Markets
- Indicators: Look for price movements away from consolidation.
- Examples:
- Euro Dollar: Long-term consolidation, not ideal for swing trades.
- Kiwi Dollar: Monthly trend showing higher highs/lows, indicative of a trending market.
- Dollar vs. Yen: Movement out of consolidation, good for swing trades.
Homework and Further Study
- Exercise: Analyze charts (e.g., Kiwi Dollar) for buy opportunities post-consolidation.
- Upcoming Session: Review setups and movements on Tuesday's live session.
Conclusion
- Mindset: Develop a directional mindset based on monthly/weekly trends.
- Future Lessons: Next session will detail framework for building swing trading strategies.
Note: Focus on long-term trends and avoid the temptation to pick market tops or bottoms. Success lies in aligning with the dominant market direction.