One of the Forex Trading Secrets That Most Traders Don't Know About - Swing Trading
Finance → Stocks, Bond & Forex
- Author Jackson Golde
- Published September 25, 2010
- Word count 520
Forex is arguably the biggest financial market in the world. There is a lot of money to be made in forex trading, but the risks are also great. Using swing trading is one of those forex trading secrets used by many successful investors and brokers, but rarely even talked about my beginners. Many successful currency traders in the industry have been very tight-lipped regarding the potential of using swing trading in the foreign currency market, but you can now use it to your advantage.
Swing trading is actually a very simple concept. It is more commonly associated with the stock market and commodities trading, but the principles also apply to currency trading. Although the foreign exchange market is a financial industry, it is still comprised of human beings. Once you realize that, you will be able to understand that the market is subject to human emotions like fear and desire. At times, human emotions can run wild. They are also very contagious and they can dictate whether forex prices go up or down. A global panic can drive prices down within a very short period of time.
On the other hand, greed can lead to hoarding, which can ultimately bring currency prices up. Like human emotions, these trends can fluctuate, but they eventually level out, bringing the market back into a stable state. Swing trading aims to take advantage of these fluctuations to generate huge amounts of profits for disciplined and intuitive investors. The concept of this forex trading secret is simple. When people are afraid, you buy cheap; and when people become greedy, you sell high.
You can watch for trends like overbuying and overselling to make informed guesses regarding how the market will react. Overbuying and overselling can be indicators that a reversal is about to happen. When the time is right, you can use this one strategy to make large profits. Of the many forex trading secrets around, this one may be one of the riskiest because you are basing your decisions more on human emotions rather than solely using statistical data, and that can be dangerous.
To take advantage of this effective forex trading strategy, you will have to watch out for short-term price fluctuations by using currency trading charts. Once the price starts going up, try to use momentum oscillators to estimate the fluctuations in the market. As the prices rise, the momentum should rise as well. Wait for the momentum oscillator to become overbought and watch out for a turndown. This is referred to as divergence and once this happens, you can trade short. Once your stop lags behind the resistance, you will be able to make a profit since the prices are now higher than when you bought a particular currency.
When it comes to forex trading secrets, using the swing trading strategy has been a well-kept secret for many years. Fortunately, you can use this highly effective forex trading method to make enough money for an early retirement. Although normally it's not recommended to make a trading decision based on emotion, doing so in this case could result in a huge payoff.
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