Swing trading systems, which are medium term transactions which last from few to more than dozen days are often used by traders, whose daily duties do not allow them to do daytrading or they want to catch price movements which are longer than a day.
Swing trading system described below use moving average to define an optimal place to open position. Trading with using this strategy is carried on every symbol, it means that you can use it on a different instrument, which are more or less connected with Forex market. This system use four hours chart to set the level which is a pivot point on the chart.
Tools used in the strategy
Swing Trading 50 EMA strategy use 50-period exponential moving average which is put on four hours chart. It let us to identify medium term trend on the instrument. Thanks to that traders can with higher probability open position on chosen instrument because when they use this investment strategy they help themselves to analyze current trend.
The signal to open position happens in the moment when candle is overlapping exponential moving average and then close below or above it. In the moment when candle closed above average and this average is heading up it is a signal to open long position. In the moment when candle closed below average and the angle of EMA is pointed down, it is a signal to open short position. When scenario above is realized then trader sets buy stop order in case of long position, 5 pips above signal candle. In case of sell order you have to put sell stop order 5 pips below signal candle.
Stop Loss should be placed 5 pips below or above signal candle, depending on that whether buy or sell signal was generated. Then after entering the transaction you need to set Take Profit on the height of twice our risk. It means that if our SL is 50 pips, then Take Profit should not be smaller than 100 pips.
In case of swing trading transaction, trader should keep safety buffer of no more than 1.5% of owned capital. This way in case of series of losses he can successfully stay through worse times. At the same time return twice as big as the loss let him compensate possible balance drawdown.