While there are many strategies a Forex trader can employ to try and extract a profit from the markets, Swing Trading is one of the more interesting approaches.
Momentum tends to be the backbone of methods such as Scalping or day-trading.
For those traders that prefer to take a more laid back approach and work off the higher time frames, then knowing what's happening with the major economies of the World is a crucial skill.
Swing Trading on the other hand is interesting because it's a particular type of trading that can be done no matter what the markets are doing. It is not dependent on long-term trends or explosive moves and as such can be traded relatively stress-free.
Price action trading is the cornerstone of a great Swing Trading strategy and it is therefore vitally important that the novice trader becomes skilled in reading price action and understanding it's implications. By recognizing when a market has reached a particular point of exhaustion and is about to turn or 'swing', then he will be able to gain a much better risk-reward than his counterpart, 'the scalper'.
Price Action Trading: The Perfect Indicator
Novice traders will often wonder what it was that caused a certain currency to rise or another one to fall. Using pure price action trading it is usually always possible to spot the reason. Much of the financial news media is made up of people and so-called 'experts' that will offer a plethora of reasons why certain events happened but he problem is that it's always in hindsight.
Profitable traders need to be in the move before the talking-heads start speculating as to the reason why the move happened. Knowing why it happened long after the trade has been and gone is completely worthless.
Trading at it's most basic level is relatively simple to understand. All markets move by supply and demand. If there are more buyers than sellers, the price will rise. If there are more sellers than buyers, then price will fall. That's it!
The changes in supply and demand are what make the swing movements in the market and it's exactly those swings that traders look to capitalize from.
Technical analysis is excellent at helping traders to spot the 'what' and remove the 'whys'. One problem though is that technical analysis indicators are lagging and therefore tend to obscure the view of current supply and demand in the market.
Price action trading doesn't rely on lagging indicators and operates purely on what the price movement is showing. Levels of support and resistance are easily identifiable to the seasoned price action trader and it's then just a matter of waiting for key patterns to unfold.