Swing Trading


In this video, we are going to examine swing
trades. Now, let me talk about what a swing trade
is. For me a swing trade is first identifying that the market is indeed in an uptrend or
downtrend and for that I use a tool called the 34EMA Wave. The second part of a swing
trade is to wait for the actual swing which could also be considered a correction or a
retracement of the trend. So, for me, a swing trade is defined as a trade where I have a
trend underway. I am then waiting for a correction of that trend. So, if this were an uptrend
I am waiting for a pullback. And at the moment of pull back, I would be positioning myself
to capitalize on support. Let us take a look at a chart that is showing
an uptrend that is pulling back into the support of the Wave. Here is the one-hour chart of
the Euro US dollar. Now, for our purposes here, we probably do not need the 200-period
simple although I feel that is an important indicator to have. Just for the clarity of
this chart I am going to remove the 200-period and the 50-period indicators just so we can
keep the tools that I use specifically for the entry of a swing.
The 20-period simple which you see here in silver is the aggressive level at which I
could capitalize on a correction. The 34EMA Wave itself is the dynamic support and confirmation
of the uptrend as it moves higher here in 12 to 2. So, it is the position that is a
buyer or a long position that is capitalizing on the support of the wave and then potentially
a continuation. Now, here I actually use this example for
particular reason because there are a couple warning signs here that would prevent me or
someone from taking this position. First of all, notice the two lower highs. Another thing
to know would be the fact that there seems to be a lot of congestion and this uptrend
was created, by and large, by a very dramatic move. Is this really an uptrend or a spike
that pull the wave up? In my opinion, this is probably a spike and not necessarily a
healthy trend. Let us look at the same pair. The daily timeframe
for what is a more healthy trend in contrast to the buying opportunity that we saw on the
one-hour chart which has two very large knocks against it, subsequent lower high and the
fact that the trend was created by a singular candle that carried prices up very sharply
rather than a healthy trend. Here is a downtrend 46 o’clock angle of the 34EMA Wave correcting
up into the resistance of the wave in the 20-period simple. The dominant psychology
for this pair is bearish. So to take a low position would be counter the dominant trend.
Let us look at another example and this time on the Dollar Canada, 240-minute chart. Now
on the 240-minute Dollar Canada chart we have a downtrend. Now, this is a downtrend that
has not yet corrected again into the wave but notice the last time that it did, not
only did prices find resistance at the 20-period simple but also within the wave. So, on another
balance higher into this area I could position myself using a conditional order parking in
order here to capitalize on the correction and then look for the opportunity to get short.
So, yes, you are selling into the momentum but the overall trend is bearish. So, you
do need a bullish momentum to get you to the entry and therefore it is a corrective entry
or capitalizing on the health of a trend, the correction of that trend and the expectation
that a healthy trend does correct and then continue.
Let us look at another example. This time one that is actually triggering at the moment
on a 60-minute Euro Yen. So, again we have the uptrend as identified by a 34EMA Wave.
We have a number of tests and pullbacks, corrections into the wave that have held as a dynamic
support of the wave acted as a hand guiding prices up higher. We have a series of higher
lows and higher highs. So this would be a swing buying opportunity capitalizing on the
correction lower into the wave and expectation of continuation higher.
Last example. Let’s take a look at the Dollar Swissie 30-minute chart. This is an example
and the reason I chose this is notice the wave is beginning to move up higher but it
is in transition. The wave clarity, the smoothness of the three moving averages, they are smooth;
the angle, yes, is technically 12 to 2 but it is not established nor has it been tested
so this would be a swing buy if prices were to correct lower into a fresh transition.
And that sometimes can be problematic. So just be cautious of that first swing. It is
one that would be valid but perhaps on the first entry consider a lighter or smaller
position sizing. So, that is swing trading, a number of examples
and, some of the warning signs for when you may not want to use a corrective entry even
within the context of an overall swing or overall trend, I should say.

1 thought on “Swing Trading

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