Forex Trading Strategies with the Swinger

Forex Trading Strategies with the Swinger

The Swinger Trading Strategy is a technical strategy based on three indicators. They focus on a traditional Moving Average crossover concept but are enhanced with some custom indicators that can be used on any currency pair or time frame. To first summarize this strategy, consider these three points;

A. Trade entries are signaled by something called a SwingLine indicator. This is a Hull Moving Average that has been enhanced and is shown in dark blue running through the price candles.

B. False signals are filtered out by something called a SwingValidator which determines when it is ok to enter. This is also shown in dark blue as a histogram.

C. Exit points are suggested by something called the Early Warning Indicator which is shown in dark blue at the bottom of the chart.

The entries for the Swinger strategy are basically the same whether you are buying or selling but the rules are simply reversed. In a buy entry, when the first candle opens above the SwingLine, it is time to go long. In a sell entry, when the first candle that opens below the SwingLine, it is time to go short. In both cases, make sure the candle actually opens completely off the SwingLine before you enter the trade. Next you will need to use the SwingValidator to make sure this is a good trade to enter.

The SwingValidator is a histogram shown in dark blue in the example below. It moves up from zero when a valid swing is developing. It moves back down when a swing is losing strength. Therefore, you will look for a SwingValidator level that is higher than the previous bar or at least the same as the previous one. It will show a trend beginning to grow.

Be careful because, if the SwingValidator stays at or near zero for three or more bars, you really need to stay away. This shows a flat consolidation period, and should never be traded. Wait for a clear upward movement of the SwingValidator before entering.

Finally, the Early Warning indicator gives suggestions where a trend may be weakening. You dont have to exit at this point but it may be a time to consider it. The example below shows two warning signs in red and the second signal is the best exit point. The Early Warning indicator is given when the line starts to go in the opposite direction of your trade.

If you have sold and the price is going down, divergence on the EW will be up. If you are buying and the price is going up, divergence on the EW will be going down. There is a final warning signal when the EW crosses the zero line and this is also a signal that it may be time to sell because a change in trend is taking place.

In this chart: http://ifxprofits.com/article10.jpg , the green vertical line shows an entry that has been validated by the histogram and the red vertical lines show warning signals due to divergence on the Early Warning indicator. They are suggested as exit points and the second warning is better than the first.

Of course, there will also be the rare instances when the SwingLine crossing is validated by the SwingValidator but the Early Warning is already showing a divergence. This is a sign that the trade is not ideal. A more conservative trader may choose to pass on this. By going to the forums section of forexfactory.com, you can find the indicators you will need and simply download them onto your Metatrader platform. Good luck using this great strategy and happy trading!

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