of this style of trading is slightly more advantageous in forex, mainly
due to the fact that you have 24-hour access to monitor and to trade a forex
position. Because of this constant market action, there are very few times
that gaps occur. Therefore, I do not trade or use the gap-“fade” techniques.
However, here are some basic rules that apply to swing trading and to
which forex traders should adhere.
• If a day trade moves sharply in your favor, carry it through the
overnight session, except for Fridays. Do not hold positions over the
weekend unless you have a very well funded trading account or can
manage a position that has a big profit built into the trade. When a mar-
ket closes strong near the highs in the U.S. session (5 P.M. EST), odds
favor the likelihood that there will be more upside potential in the European
session. Tighten stops and look to exit the next day near a pivot
point target resistance level.
• If your trade starts making money from the get-go, your entry was correct.
Good trades generally start to move in your favor almost immediately.
Prices may come back to test your entry level a little, but they
certainly should not test your risk level. It’s perfectly acceptable for the
market to hover at your entry level for a bit before performing in your
favor.
• Do not carry a losing position from one session to another. Exit the
trade and look for a better signal.
• When you enter on a bona fide trading signal, don’t get fancy and try to
get a better fill by placing limit orders; go to the market. Other traders
or systems (competitors) may also pick up on the signals, and you
could miss out on a great trade.
• Never anticipate that a signal will happen. Wait until the close of the period
for which you are trading to confirm the signal. If the market is
going to move, it is best to go with the trade momentum as confirmed
by the closing time period rather than guess and be too early on a long
entry, only to watch the market crash and burn.
When you are looking for a short-term day trade, focus on the 5- and 15-
minute time periods for which a signal was generated. If you have time
constraints that limit you to following the markets, such as work or
bedtime, then scaling out of positions and trailing stops are great features.
If you capture a strong-trending market condition and turn a day trade to
a swing trade, then follow the 60-minute chart at the close of each 60-
minute time period to see what the relationship of the close is to past highs
and lows.
In addition, focus on the higher-degree time frame pivot points, such as
the monthly and weekly support and resistance levels, as well as on the
moving average values, to see where prices are in relation to both averages.
If there is a crossover and prices close above a prior high and if the 60-
minute chart closes above all of these variables, then you want to go long
and/or look for buy signals on the shorter-term time frames, such as the 15-
and 5-minute periods. For swing traders, watch the daily charts and the 240-
minute time period in conjunction with the 60-minute period.
Source: Forex Conquered: High Probability Systems and Strategies for Active Traders
