Swing trading strategy is one of the most popular trading strategies used by the professional trader in the financial industry. Many large institutions and bank trade in the direction of the prevailing trend using the swing trading system for the long term.
Since this strategy is a trend following technique, you can easily ride the prevailing trend until any major bearish trend reversal signal. This system is free from all the indicators and the traders trade the important support and resistance level with price action confirmation signal. Let us see how the professional traders use swing trading strategy to trade NZDUSD pair:
Figure: Simple swing trading strategy using the support and resistance level
In the above figure, traders use the important support and resistance level to trade in the direction of the prevailing trend. It’s very clear the NZDUSD is in a strong uptrend since its making successive higher high in the market. Trading this strategy is very simple and profitable. Once the market breaks a high in the pair, trader waits for the minor retracement of the market. The previously broken high of the market acts as a strong support level in the pair. Professional traders wait for price action confirmation signal in the new support level to enter their long trade.
In general, professional traders use tight stop loss while trading with this strategy. They generally put their stop loss just below the confirmation candlestick pattern which formed in the key support level. setting the take profit area is the bit tricky in this strategy. Many traders prefer to set their take profit level in the next nearest key resistance level. On the contrary advanced professional partially book their profit in the major key support and resistance level and rides the trade with the remaining open position on the trade.