Swing Trading - a Profit Opportunity Right Now in the Market


by Sacha Tarkovsky - Date: 2007-02-25 - Word Count: 490 Share This!

Someone wrote to me and asked me to look at a live situation on the market that is a potential profit opportunity, so were going to do just that and were going to use a very simple method anyone can understand.

I have always maintained the best way to trade is with charts and a couple of indicator, so lets look at a real life example shaping up right now and how it can be traded.

For the purposes of this illustration we are writing it on Sunday 25th feb for Mondays open. You can use any of the free chart services on the net the one we are using is futuresource.com

Indicators were going to use

Support and resistance, Bollinger bands and stochastics and that's all we need, if you don't know how they work, check our other writings.

Long term trend in the BP

Is up. Check out the longer term charts, now go the daily and you will see the Pound Dollar is trading to the upside and looking to test recent highs (after the may breakout)

In an up trend the middle of the Bollinger band represents value (notice how dips to this line give buying opportunities) and the line below it represents a support last line of support for the bulls.

Prices in a bull market will punch up toward the top line (the blue band) .layers of resistance on the chart are the recent spike high and the double top.

This area if broken could see the pound go much higher.

We would not try and anticipate this happening we would wait for a close above the previous daily high to confirm the breakout and go with it.

In the short term there looks to be the chance possibly of a swing trade against the major trend.

Swing trades normally last for a few days to around a week and on falling momentum here we would look to go short.

So were bullish and bearish depending on what the price action tells us.

We are not going to predict here but think a swing to the downside may come.

We would buy the breakout, but how would we swing trade?

Look at the stochastic now.

This is a great short term indicator and you will see the pink line has crossed the blue line with bullish divergence indicating short term price strength.

We would watch the recent highs and a cross with bearish divergence (the pink line crossing the blue line) to initiate a short. The target would be the middle Bollinger band the green line.

Don't anticipate wait

We don't know if prices will break higher or there will be reaction within the main trend, so we would wait for confirmation and let the market tell us where prices may go.

Of course these trades could go wrong but support and resistance for stops are obvious and if we lose losses can be kept small.



Related Tags: forex trading, forex trading system, swing trading, currrency trading, online currrency trading

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