It refers to a swing of one currency in one direction which does not reflect changes in the price of other currencies. It is used to gauge the trend of currencies. A trend line is formed by creating a weighted average of the current swing and the previous swing. If price does not move in a direction that is opposite the previous swing, the trend line is no longer valid. This is what traders call a trend reversal trade.
Forex is not made or sold in real markets. It exists only in the minds of traders. And they decide which currency can be taken advantage of best, and they decide how much they are willing to trade. However, the rules of the games they play are totally different from the rules of real markets, where traders buy and sell currencies on an exchange to make profits and losses, and they don’t trade in the opposite direction.
A swing trade in forex is very difficult to understand without a basic understanding of the currency markets. I will attempt to explain it in the simplest way I can.
What is a currency?
If we define currency as being money in circulation, then we can see that currency is the name given to the coins, notes and bills that the different countries issue.
What is a swing trade?
To show that a price swing was done, we need to have the price of an indicator at several levels, then we want to see how it affects the trading price of currency.
What is a currency in the market?
In our example, we would have USD as the country, CAD as a currency, JPY as the trade currency, and EUR as the currency against which currencies are traded.
In the real market, a country issues its own currency, they sell that currency to the world in a market for the currency, and they lend it to other countries in the market to serve as a currency in the market.
These are the types of trades that traders do. However, the rules of the games they play are completely different. Most trades in the real world are between companies or governments, whereas trades in the games tend to be between individuals.
Why is it hard to understand for beginners?
For beginners, buying or selling is usually more difficult than trading. Many traders simply don’t understand the rules or the rules are not clear enough.
The biggest factor is the cost of the trades. Most traders who know how to trade use brokers to make the trades, and broker fees add up
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