In my trading, I use mostly Fibonacci combined with Pivot lines (daily and weekly pivots). Still, there are times when I check yearly Pivot lines. You may find examples below very interesting.
Why Pivot Points lines
They are calculated on price, many traders and fund managers follow them. Same with algos and trading robots, which are very well aware where important Pivot lines are. Day traders use daily Pivot Points (calculated on previous day price), swing traders use higher pivots like weekly or monthly.
It is very rare that traders check yearly pivots and they miss very important information. Yearly Pivot is calculated based on previous year:
So we take high, low and close from the previous year, sum it and divide by 3. That is our Pivot line (middle line). There are also S and R lines (more about calculating pivots here). That is why these levels are very important because they are calculated based on such a long period.
If we check examples we can see that price respects them. Of course, not in every case. We have to remember that there are many other important levels like trend lines, support and resistance lines from previous lows and highs and so on. Still, in many cases, it is worth to know where are yearly Pivot lines.
SP500 is moving down very strong. Some people say that this is a correction, other that it is start of the bear market. We will see. For now, we can see that yearly pivot line at 2536 area stopped a selloff twice. It was a place where many traders were taking profits from short positions.
Also, check this price around R1 resistance, on daily chart it looks like it did not work, but…
On monthly chart, different story. We can see clearly that yearly R1 was a strong resistance and pivot line was a support.
Of course, we have to remember about one thing – pivot worked as a support, but it does not mean that move down is over. For now, it worked as a support. If we see a move below yearly Pivot that it can be a sign that continuation of a move down (and even a bear market) is possible.
Below monthly chart of WTI oil. In 2017 there was a strong support at yearly Pivot line. For few months we saw a range move around 50$. Later, after break price went up to the yearly R1 level which was a resistance.
The very interesting situation on monthly USDJPY. The whole 2017 was a range move around Pivot line. Now it looks like Pivot for 2018 is working as a resistance. What is next for this pair? We will see, but I watch it closely.
Simple example. In 2016 and 2017 Pivot lines worked as a support. There was also a resistance at yearly R1.
Very interesting example. We have many points marked on the chart where yearly Pivot lines were respected by DAX:
How to use yearly Pivots in your trading? When there is a rapid move like the one on SP500 then I go to higher time frames and Pivots to check where important support and resistance are.
In the normal trading condition, it is ok to check it from time to time. I usually check the situation on monthly and yearly Pivots in the weekend when I’m preparing for next trading week. During a week I use lower Pivots and my Fibonacci tools to enter a trade, but I’m aware of these important levels from yearly Pivots.
The examples above showed you that this information can be very important.
Bitcoin is going down and we can hear opinions – it was a bubble, it will be 20$ again and so on. How does it look from the technical point of view?
Pivot Points on Bitcoin
We can check monthly and yearly Pivot Points. Why Pivot Points? They are calculated based on price (calculated on monthly chart then we have monthly pivots, on weekly then weekly pivots and so on). As a result, we have important support and resistance lines. Of course, we have to remember that we are talking about possible support/resistance areas. If the price will get near them there are good chances that they will work.
Monthly Pivot Points
For February there are two important supports – monthly S1 at 7182$ and monthly S2 at 4457$:
Yearly Pivot Points
Last year was a time of a strong move up on Bitcoin. Now based on that data we have pivot lines for the year 2018. We can see right away that pivot line at 11505$ was a resistance and price moved down to the M2 line:
Yearly S1 is at 3663$ and it is an important support.
For me, that yearly lines looks interesting because pivot and M2 line worked already. If Bitcoin will go lower then we should remember about that level.
Fibonacci and Bitcoin
We can also draw Fibonacci with ABC pattern. C point was at 61.8 retracement. Now Bitcoin is at 138.2 extension line. Next important extension is 161.8 around 5650$:
Other examples from history
The situation on Bitcoin is nothing new. People call it bubble etc.Yes, that move up was very strong so we have a strong correction. There were similar cases before, but the pump was not so big.
We can check the Gold chart to see that there was a strong move towards 2000$ and nearly 50% selloff.
Oil was once at 150$. Then after selloff, it went down to the 40$. Was it over for oil? No, but it was not moving so strong.
Or we can take a random penny stock chart. Traders who trade penny stocks hunt for pumps. When they can, they also go short to hunt a dump. Just look at this:
That is why I do not think that Bitcoin is finished, but it is possible that we will see Bitcoin to act more like any normal instrument.
Ichimoku Kinko Hyo is a Japanese investing technique. It provides all – trading signals, resistance and support levels. It is very different from normal western techniques such as trading with moving averages, but after a while you should understand it easily. It was created around 50 years ago by Japanese journalist Goichi Hosoda. He started to work on Ichimoku before World War II. To the West, this technique is known from 90s, just like candles it was unknown for many decades.
First, let’s see how Ichimoku is build. Later we will check how it can be used in trading stocks and Forex.
Ichimoku Kinko Hyo is build from 5 averages (notice – these are different averages than standard moving average that you know):
Senkou Span A and Senkou Span B – area between them is called Kumo, or simply just Ichimoku cloud. This is a resistance and support area Kijun-Sen – longer signal average Tenkan-Sen – shorter signal average Chikou Span – this average is shifted back by 26 periods
So when we put this together, we’ve got a ready investing system:
Time to learn more about each component.
Kumo (Ichimoku cloud)
Usually, we look for support or resistance right at moving average or support line. Ichimoku cloud is different – it is area of possible resistance or support. The thicker cloud is, the stronger resistance or support should be at this place. If cloud is thin, than possible support/resistance should be weak:
When price manage to break out or break down from cloud, then this is a strong signal to take position, because it happens rarely:
It is longer average, based on 26 periods. Let’s compare Kijun Sen and 26 moving average. As you can see, it acts different.
From my experience, I can say that Kijun Sen itself is a good resistance/support level.
You can compare Kijun-Sen with normal moving average:
It is shorter average. Based with Kijun Sen it gives signals to buy and sell (more on that later). When trend is strong, it can also act as support/resistance.
The main idea behind Chikou Span is that it helps to compare current price with price from 26 periods before. The end of Chikou Span is the current price close. Based on that we know if the current sentiment is bullish (Chikou Span above price) or bearish (Chikou Span below price).
Ichimoku trading signals
We have few types of trading signals from Ichimoku based on Tenkan-Sen and Kijun-Sen cross.
There are also signals to open a trade when price break from the cloud. You will see all that in the examples and it should be clear.
Ichimoku trades examples
First, to get more comfortable with Ichimoku, let’s start from higher time frames, which are easier to
read and trade.
I like to invest with Ichimoku in longer time frames. It is great when you look for entry point, not so great when it comes to exit, but we will also deal with that.
What I look on chart is mostly breakout from cloud. For me this is the best signal from all you get from Ichimoku. I check history, few years back, to see how price reacted around cloud. Were there many good signals after cloud breakout? Sometimes price action for current stock is so specific that this does not work so well. Then I move to another stock. When history confirms that price works well with cloud, I make decision or not. I place stop usually below cloud.
Sometimes price is already above cloud and trend is getting stronger. Then I look at Kijun Sen and Tenkan Sen. If Tenkan Sen is above Kijun Sen, I have a confirmation of uptrend. Then I like to look for breakout from resistance. Drawing resistance and support lines is very important here. Remember – it is weekly chart so if there is a resistence line, say, from top from six months before, there is a big chance that price will respect that resistance. If it manages to breakout, then it is a good signal to go long. So in that case Ichimoku is like a background, but important one.
Adobe stocks, monthly chart
I do not follow signals blindly. So when there is a breakout from cloud, I check other things. Most important for me are trend lines. Monthly chart of Adobe is a good example. We had two breakouts from cloud which failed because of resistance lines. Finally price managed to breakout from cloud and resistance lines – this was a perfect moment to go long.
7.1. Long trade on break above cloud and resistance lines
If trend is strong, then price is above Kijun Sen. This is my stop loss. I do not wait for Tenkan Sen and Kijun Sen cross to close position because this signal comes on most cases too late. Other technique you can use is to set stop loss below recent low. This will be your exit point.
City stocks, weekly chart
7.2. Break from the cloud
This is a little to perfect example of trade. I use very often breakout from cloud as signal to enter. In this example we saw a long breakout and price went up above 50$. Exit place was when price closed below Kijun Sen. It is not always that easy but it is rather a good example of potential this signal has.
Electronic Arts stocks, monthly chart
7.3. Adding oscillators to help decide if breakout is valid
Problem with breakouts from cloud is that you may see some false breakouts. In the chart above the first long breakout was false, the second one was correct and trade should be closed above Kijun Sen.
You can try to add another condition to the breakouts from cloud. In this example, we used Williams %R to filter breakouts. The conditon is simple – %R should be in oversold or overbought area to enter trade.
On the right side we can see that it looks like another trade opportunity, with breakout from cloud and %R in oversold area.
EMR stocks, monthly chart
7.4. Example of different breakouts
This trade worked great – long at cloud breakout and close below Kijun Sen, but… You can see on the left and right side that there were some breakouts, which did not bring strong trend. I would not call all of them false. Some worked out, but with smaller range of moves. That is why it is so important to manage wisely your stop losses.
ROST stocks, monthly chart
7.5. Signal to go long (break from cloud), stop loss would be below cloud
When cloud is thin, I place stop loss below cloud. In this case we took the first long breakout and set stop loss below cloud. Move up did not start rigth away, but ROST hold above cloud and is going up strong.
COP stocks, weekly chart
7.6. Open and close position based on Tenkan and Kijun lines
Sometimes the trend is strong and price will be far away from cloud, so no signals from cloud breakout. When you see a situation like that, you may use breakout below or above Kijun Sen as a signal.
First trade – after correction price returned above Kijun Sen (black). We got signal to go long. An exit was here below Tenkan Sen because we spotted that price is most of the time above Tenkan and Kijun is far away.
Second trade – same scenario. A long breakout above Kijun Sen and close below Tenkan Sen (because Kijun Sen was too far).
Ichimoku and Fibonacci Forex trading strategy
I hope that now you understand Ichimoku pretty well. I like to join Ichimoku with Fibonacci lines. Why? Ichimoku gives me a look at current situation. It can also give us a signal to take positions. So in short:
I open position based on Ichimoku and Fibonacci retracement lines
I exit position based on Fibonacci extension lines
I prepared some examples and it should be clear how to join these tools.
USDJPY, 1-hour. Correction to the cloud and break from cloud
This is an example you will see many times. Move from A to B, then correction which goes inside a cloud.
Break from the cloud is a good Ichimoku signal. If price breaks out above the cloud, then it is a buy signal. If it breaks below cloud, it is sell signa.
In this case, after correction to C – 61.8% (inside cloud) we saw a break down from a cloud – a signal to sell. Also, there was a break below Kijun line – another bearish signal.
This was a start of a stronger move down.
8.1. Break from the cloud as a trading signal
Another example when there is a correction to the cloud and after that a break from the cloud and signal to sell.
If it is not a range move then this signal works pretty well.
8.2. Ichimoku and Fibonacci – example
Sometimes the cloud is far away from price. In the example below, we can see that C (61.8%) was away from the cloud.
After cloud, our next indicator of possible next move is a break through Kijun line (green).
OK, so we didn’t have a break from the cloud, but there was a break below Kijun-Sen.
Again. When a market is not in a range, this is a good indicator od possible price move. Indeed, in this case, it was. After a break below Kijun, we saw a strong move down.
8.3. Use of Kijun-Sen as an entry signal
GBPJPY, 1h, part-1. Kijun-Sen as trailing stop
Kijun-Sen is a great indicator even left alone. We will see that in this 2-part example.
Let’s start from entry.
ABC move. C was at 50% retracement. We saw some range move below 50%. Price entered a cloud and later there was a break down from a cloud – a signal to go short.
Of course, in this case, we could wait for a break below the green trendline.
This was a good entry, with help of break from cloud which I described before.
8.4. Part 1 – short position after break from the cloud
GBPJPY, 1h, part-2. Kijun-Sen as trailing stop
Now we have an open trade which is profitable and there is one question. Where to exit?
I wrote later that I like to close my trades in parts. Sometimes you see so strong trend that you start to wonder – close at extension or wait?
8.5. Part 2 – Kijun-Sen as trailing stop
I always close part of my trade at 161.8%. This is very popular level were many traders do the same. Still, if a trend is strong you can use Kijun-Sen as a help. Kijun often works as a resistance. In this example, we saw that during a correction Kijun acted as a resistance. A clear signal to place trailing stop loss above Kijun. Thanks to that single Ichimoku line we could catch a hefty portion of a move.
TD stocks, weekly chart
On weekly chart, we can spot easily ABC move. Correction stopped at 50% retracement and we saw some activity from bulls. When to enter? I left Ichimoku on chart. On higher time frames price rarely crosses with Kijun-sen. When it managed to close higher than Kijun-sen, it was a good entry point. Later there was a nice, strong move up to the 161,8% extension line. Does it mean that this move ends here? We do not know that. We only know that this is a good place to close position.
8.6. Strong move down to the 200% extension
Remember – it is a weekly chart and still we can pinpoint exit point with good precicion.
Using Ichimoku Kinko Hyo Monitor
Ichimoku is great in long term trading, but you can also use it in short term trading. The problem is that Ichimoku is rather complex (we have signals from Kijun, cloud etc.). Add to that fact that we have to check the situation on other time frames. It may be tough for someone new in Ichimoku. Even for me, it is not easy when I scan many pairs.
I included to my trading with Ichimoku an indicator called ichi360 Monitor. It is not written by me. Few years back there was a very good blog ichi360.com about trading with Ichimoku. The blog is not around anymore, but author (who was also a programmer) shared some indicators on his site. To this day, you can find them on various FX forums.
Ichi360 Monitor is very cool little indi. It looks like that:
8.7. ichi360 Monitor on chart
We are interested in the lower part:
8.8. Situation on all timeframes
We can see situation on all time frames from 1m to weekly. The shortcus are:
PA – price action, is price going up or down
P/K – price to Kijun-Sen
T/K – Tenkan-Sen to Kijun-Sen
CS – Chikou-Span
C/K – Cloud vs Kijun-Sen
C/C – Cloud vs Chikou-Span
Take a look at this 4-hour Bund chart. Thanks to the ichi360 we know that on all time frames situation is bullish. Also, we had a buy signal from Ichimoku and, of course, a nice looking ABC Fibonacci pattern. It looks good and should be a good long trade.
Unzip the files. First, copy both files named Kijun-Sen+ to the folder expert / indicators. It is located in your Metatrader installation folder.
Next, copy the rain-template file to the Templates folder located in your Metatrader installation folder.
Now run Metatrader, click the right mouse button and select the rain-template from the templates available.
Now unzip the files and copy them to theexpert /indicatorsfolder. It is located in your Metatrader installation folder. Restart Metatrader.
Go to the upper menu Insert -> Indicators -> Custom and select Pivotpoints-day-week-month. Now you should see this configuration window:
13.1. Configuration window for Pivot points.
Go to the second tab. Here you can edit which Pivot points you want to place on your chart. For weekly points, for example, select Weekly: true and Weekly_SR_Levels: true. If you want to place all of them, select true for each option.
I recommend leaving theUse_Sunday_Data set false.
Click OK and you should see the Pivot levels on your chart:
13.2. Pivot levels on chart.
I recommend saving this as a template. Just click the right mouse button on the chart, go to Template and select Save Template.
How to setup the retracement and extension lines together in MetaTrader?
Select the Fibonacci retracement tool from the fast menu:
13.3. Setting up retracement lines – step 1.
If you can’t find it, go to the upper menu (Insert), click Fibonacci and select Retracement.
Draw the retracement lines on the chart:
13.4. Draw retracement lines anywhere on your chart.
Select them so that the line going from 0 to 100 is highlighted. Now click the right mouse button and select the first option – Fibo properties.
In a new window, go to the second tab – Fibo levels. This is the place where you can add, remove or edit your Fibonacci levels. To edit value, just double click on it.
13.5. Window where you can edit levels.
The first column in the table (Level) is a place where you define the level. The second column (Description) contains the description visible on the chart.
Now edit values in order to have levels as in the following table (the list is in the Level – Description order):
As a result, you should have the retracement and extension lines as one tool:
13.6. Final result – extension and retracement lines together.
In the future, you can edit these levels if you want to, but this set is more than enough for new traders.
How to draw them correctly?
It is simple. In a downtrend, when you look for a short opportunity, you draw the retracement from high (A) to low (B):
13.7. Correct direction of drawing retracement lines in a downtrend.
At point A there will be the 100% line and at point B – the 0% line.
In an uptrend, when you look for a long opportunity, you draw your retracement from low (A) to high (B):
13.8. Correct way of drawing retracement lines for an uptrend.
In such cases at point A there will be the 100% line and at point B – the 0% line.
Almost the end
So, how hard is it to trade with Fibonacci numbers? I hope that after reading this guide your answer will be – hey, it is not so hard. Of course you can build complicated trading system based on Elliot waves and Fibonacci numbers, but it is not our goal. We want to trade with simple system, which is easy to understand and to follow. I did my best to show you how to trade with Fibonacci numbers that way. If something is still confusing for you, simply go back and read that part again or just write to me – I will be more than happy to help you.
When it comes to successful trading, there are some important things you need to cover:
• Good and easy to follow trading system
• Proper money management
• Patience and lots of practice
I have covered first two parts, but the last one is up to you. I hope that you will succeed and be profitable. It is possible to make good money in Forex and stock markets and I truly believe that with Fibonacci numbers you can achieve that!
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Selection of a broker and currency pair is very important.
There are many dishonest brokers, there can be problems with money withdrawing, trade execution, slippage and many others. If you read few topics from Forex Peace Army you will know what I’m talking about.
It is also important what you trade, on which time frame. Trading EUR/USD and USD/CAD is very different, each currency pair is unique.
Selecting a broker
First, we need to start from most important thing when we talk about scalping – selecting a broker. There are many brokers out there, but only small part of them allow scalping. You can look for all alternatives you have. I can recommend brokers that I use with my daily trading – Yadix and TickMill. They are scalping friendly, they also have an account for scalpers – Check it here and here.
It is not only about spread
What is the difference? It is not only about the low spread. It is about setting stop loss and take-profit orders. With a standard broker you are not allowed to set them nearer than few pips (usually 3-5 pips are minimum). And that is a big problem. Because of that limitation, you can’t scalp.
When you are scalping, you plan to take more trades during a day. If something goes wrong, you close your trade. If you are profitable, you are not holding a position for long period of time. You take small profits. To be able to do that you have to place your stop loss and take profit near to the entry points. For some reason, this is a problem for most brokers and they do not allow that. That is why you want a broker which allows you to scalp.
It is not only a problem for scalping. In normal day trading or trading on lower time frames like 5m, 10m, 15m sometimes you want to move your stop loss near to the entry point or to break even. If the price is near to that level, with most brokers you won’t be able to do that. That is why you want a broker with no limits for stop loss and take profit orders.
Others broker you can check for scalping account:
Selecting currency pair(s)
You want to scalp on Forex pairs where you have low spreads and good volatility. So it is a good idea to stick to major pairs like EUR/USD, GBP/USD, USD/JPY, USD/CHF and few others. If you have a spread around 1 pip or lower than you are good to go.
Another important thing – spread can be higher during news or economic data publications. In some cases, this difference can be huge so make sure that your broker offers decent trading conditions when the market is more volatile because of news.
The last thing – one pair at a time. If there is some strong move on EUR/USD then probably there is a similar strong on other dollar or euro pairs. Do not try to trade few pairs at the same time because in scalping it is not a good thing. Focus on one Forex pair. I recommend starting with EUR/USD or USD/JPY. If you look for more swings and you have good spreads then GBP/JPY can be a good alternative.
But probably you will start from EUR/USD – this is the most popular pair and you should have here the lowest costs of trading.
Most people trade during London and New York sessions. There are few reasons for that:
market are trending more often
we have news and economic data release during a day
Asian sessions and scalping
Of course, it does not mean that you can’t scalp during the Asian session. You can, but you should use a trading strategy which works better in conditions like:
If there is no important news during Asian session then very often markets can be quiet. There are times that week is packed with news and important changes and you can see nice trends.
Still, Asian sessions are harder to scalp but you still can find good opportunities. Just check Yen, Aussie and Kiwi pairs. There should be more movement on them during Asian sessions.
How many pips, how many pairs
It depends on trader and strategy. Some scalpers prefer to take just small profit of few pips. The common range is somewhere between 10-30 pips, but some traders prefer to scalp 2-5 pips. I personally do not have a problem to hold trade little bit longer if I see a strong trend.
How may pairs at once
If you are new to scalping then most definitely only one. You have to react fast, follow the price action. It is hard to do that, even with few monitors on board. The other reason is education. Every pair can act a little bit different, trading can be different. It is hard to create and improve your trading strategy when you trade few pairs at the same time.
Of course, you can trade few pairs, but first, you should be profitable when you trade only one. Them, if you feel confident to trade more then go and try it.
Anyway, your choice will be narrowed down to few pairs with best trading conditions (spread, volatility). Remember that these pairs are connected with each other. In the example, when there is some big news about dollar then it can affect both EUR/USD and USD/JPY at the same time. So in many cases, it does not help if you trade similar pairs.
The higher time frame is also important to remember. You should know what is going on on highest TFs. If you want to trade few pairs, you have to follow few higher time frames. For new traders that might be confusing.
How many pips
Think about profit and not about a number of pips. In some situations, you trade with bigger leverage and it is ok to take a quick profit. Sometimes trend will be stronger, important support and resistance lines far away and it will be wise to hold on to trade a little bit longer. So no one magic value here.
Day trading and scalping guide - menu:
Basic info about day trading:
The file also includes MACD and RSI based on DEMA.
Every trader is familiar with basic moving averages such as:
Simple Moving Average (SMA)
Expotential Moving Average (EMA)
Linear Weighted Moving Average (LWMA)
Smoothed Moving Average (SMMA)
SMA and EMA are the most popular one. They work nicely in a stock market, but in faster markets (or lower time frames) they tend to lag. That is why traders kept on improving averages and that is why we can use other types of averages. DEMA is one of them.
The double exponential moving average (DEMA) was developed by Patrick Mulloy to reduce the lag time. It was first described in 1994, in the Technical Analysis of Stocks & Commodities magazine in Mulloy’s article “Smoothing Data with Faster Moving Averages”.
DEMA can also be used in indicators which are based on moving averages (MACD, Bollinger Bands, others)
Differences between DEMA and other averages
Let’s take popular pair of 21 and 55 expotential averages:
And pair of 21 and 55 double expotential moving averages:
You can see that DEMA averages follow price more closely.
Installation of DEMA (Double Expotential Moving Average) in Metatrader4
In Metatrader4 open File menu (left top) and select Open Data Folder. You should see a new window with MT4 folders and files. Something similar to the screen below:
Go to unzipped folder. Move content from MQL4/Indicators to the same folder in MT4 window.
Do the same with templates. Go to the Templates folder and copy content to the same folder in MT4 window.
Questions? Leave a comment and I will try to help you.
Swing trading is a popular trading method. This topic is wide, but I will try to present you my approach.
If you have any questions about that topic, please feel free to ask in a comment section.
What is swing trading?
Swing trading is a method of trading where we want to use strong directional moves (swings) to place a trade. Usually, this will be moves which last somewhere between 1-7 days.
In most cases these moves will be strong, so we have a better chance for a successful trade. Why? Because it is harder for institutional traders to move in and out.
Take a look at this example from lower time frame:
You can see all these strong moves which do not last very long. It is much easier for institutions to create such a short-term moves. A reason behind it may very – it may be for stop loss hunting, for high-frequency trading etc.
It is not that easy on higher time frames where many instituations follow the same trend move:
Swing trading – is it for you?
Let’s see what options we have when it comes to trading:
a) Day trading
Many people think this is the fastest way to make money. That is why it is a very popular choice. In reality, it is the fastest way to lose money. Remember example from before?
In day trading you basically do not keep an open position for the night. You try to open and close position in the same day.
For some people, this is very appealing, but that is a topic for another post.
b) Swing trading
You open a trade on higher time frames. You keep it open for few days, sometimes a little bit longer.
c) Longterm trading
When you look for best trading opportunities on longer time frames like daily, weekly, monthly. The trade here can last few weeks or even months.
Yes. Swing trading is the best option for traders, not only Forex but in general. Ok, maybe long term investing is also a good direction, but for many traders
What is better – day trading or swing trading?
In my opinion, for most people, it will be swing trading. The higher time frame you trade, the better chances you have of being successful in trading.
Yet, there is all that hype about day trading. People believe that this is their best chance to make money fast. It isn’t, trust me with that.
I do daytrade, but this is very difficult to learn. It is not only about trading strategy. It is more about your psyche, finding time to trade (and stay alerted), following rules… Basically, day trading is a hard work.
You can make money as a day trader, but day trading is one of few options. You can also make money as a swing trader so the choice is yours.
We should talk about an important difference between day trading and swing trading. In day trading you open position for few minutes, few hours. That’s it. Because of that, you need to open bigger positions so you have a decent profit. Like in the chart below:
You can see above a 1m EURUSD chart. Moves are around 10-20 pips, sometimes larger. If you want to earn some money on a move which is 10 pips long then you have to open a really big position (1 lot or bigger).
In a swing trading you plan to keep position open for few days, you hunt for bigger move. Thanks to that you can open smaller position:
With moves around 100+ pips, you can make good profit and position doesn’t have to be very big.
Swing trading = you have a life
This is a very important thing to remember. With swing trading, you do not have to be in front of a computer all the time. You can do your other things like work or simply go out. You have a pretty normal life.
And still – you can make some good chunk of money. This may seem funny to you but anyone who was day trading knows what I mean by that.
If you have only a few hours a week for trading – you can still do it. If you can’t be in front of a screen for 8+ hours, that’s fine. You can still trade and make money.
OK, I tried to explain why swing trading is a right choice for most of the traders. Now let’s dive a little bit deeper into the topic. I’m not trying to do very specific guide here but to show you the right direction. The rest is up to you.
Best instrument to trade with swings
It depends on your personal trading style. Do you want to use leverage or not? If leverage is ok then you have a wide choice from CFDs, e-mini, indices, currencies… If you want to avoid leverage then you should stick to the stocks.
In general, we look for instruments with good trends. How to spot them? Simply check chart history.
If it is often in range move like chart below then you should probably skip it:
On the other hand, if you see that ranges are short and you can spot often a trend then it should be a good pair to trade.
An example of good, trending instrument to check out:
yen pairs – like GBP/JPY, USD/JPY
pound pairs – because of Brexit some moves are rapid, but there is a lot going on here
indicies like S&P500, DAX
You should try different instruments so you can select the best ones for you.
This is an important factor. When you trade, you have spread or percentage fee for a broker. You pay it when you open and close a trade. In day trading, when you make sometimes 100+ trades in a month, these costs are a huge part of your trading results. Because of that, you have to stick to instruments with best (lowest) trading costs. In Forex this will be majors (4 major pairs like eur/usd, usd/chf, and others) and others with spread around 1 pip.
It is a different story with swing trading. You have a much wider selection. Spread is 4 or 5 pips? You can still open a trade if you look for 100+ pips move. Thanks to that you can look for trading opportunities on many different pairs.
Time frame for swing trading
In most cases, this will be 1-hour and everything above it. You can go lower if you want but if our goal is to catch bigger moves then we should aim for bigger time frames.
There are many strategies which you can use to trade with swing trading approach. Over the years I used many of them. Below are some that I recommend:
Breakouts are still very popular and there is a reason for that. This is a strategy with a good probability.
Problem here is with false breakouts like on example below (1h, GBPUSD):
It looked very promising, but there was no continuation of the move down. Price turned up and started a move to new highs.
Also, it is not that rare that breakouts are rapid (also 1h GBPUSD):
This move down was so fast that it was hard to enter it in right time. Maybe pending order would help here, but on many times it is risky and hard to get a good price with such rapid moves.
If you do not catch breakout, then on may times you can see correction which is a good place to enter a trade after a breakout:
You can see that price broke above the resistance line. Price moved back twice to the resistance line – it was a good moment to enter a long position if you missed it in the first place. Later, we saw a strong swing up.
When to exit
In most cases, you set your take profit target at nearest resistance level or you can exit based on another signal (trailing line, CCI cross or other).
Patterns and price action
There are soo many indicators. Yet, you can see pro traders rather base their trading decisions on clean charts. There is a reason for that. They remove all the noise from oscillators and base their decision on price. This gives them best results.
Patterns are a great way to enter a swing trade. It takes time for them to form. When there is a break from the pattern it is usually strong.
When it comes to patterns, I always recommend books by Chares Bulkowski:
I wrote about Ichimoku trading here. I remember that it was so hard for me to understand the concept behind it. But back then there was a lack of sources so it was a bit of trial and error for me to master Ichimoku. Now you have so many materials and it is worth to put time into learning this technique.
You have more details in my Ichimoku tutorial, but there are some important things you should notice.
This is my opinion – the higher time frame, the better results with Ichimoku. Especially weekly and monthly works great, but this is a long-term approach. As a swing trader, you will probably use Ichimoku on 1h, 4h or daily where it works great too. Just be careful when you trade with Ichimoku on lower TF than 1h. When there is a trend, then it is all fine but there are many surprises on lower TFs.
I recommend trying other than standard 9, 26, 55 settings. There is a popular set of 9, 68, 177 which works very well in swing trading.
This is a very good entry signal, especially when cloud is flat:
Keep an eye on it.
Pivots are a great technical tool when it comes to swing trading. We have support and resistance line and pivot line in the middle. In many cases price respect these lines. We can expect strong moves form that lines:
How to use it
S lines act as a support, R as resistance. When we have an open trade, we can use them to set take profit target. When we hunt for a trade then we can use them to open a trade when there is a change in a move.
What to remember about
There are Pivot Points for each time frame. If we are day trading then we will be using daily Pivots. When we are swing trading then we look for trades which last few days. In that case, it is best to use weekly pivot points or sometimes even monthly (if we plan to keep trade open for weeks).
It is best to combine Pivot lines and resistance/support lines. When we see that they are near each other then this point should be important for the price.
You can use only Pivot Points and trendlines/price action or you can include it in your trading strategy. I can’t recommend enough to learn and use Pivot Points.
We look here for trending moves. When there is a trend, then we can localize ABC patterns:
You can enter a trade near resistance line or wait for confirmation after break above/below recent C point. The main idea here is to catch move from C to D. We want to exit it at one of extension lines.
Joined Fibonacci and Pivot
You can have great results when you join Pivots and Fibonacci.
It helps you with entry and exit.
There are not many oscillators in this guide because I do not use too many of them these days. If I do then I stick to basics like MACD, CCI or %R. I had good results with MACD set to longer periods. With that in place, I was looking for an entry on the break above or below 0 line. This is very good signal and you can also include it in your broader trading strategy.
I wrote a guide about Renko charts. Renko is a totally different approach than standard technical charts. Still, it is very powerfull. You can use it to clear out noise and stay in a swing trade as long as possible:
There is a problem to find good Renko charts. My recommendation is to test tradingview.com. They have the best Renko charts in the market.
My swing trading strategy
I presented many different strategies. I personally use a Fibonacci technique with pivot lines.
When I enter a trade
In most cases, I enter when there is a bounce from retracement line. I usually look for channels. When there is a breakout, I open a trade. I place a stop loss below channel and retracement line.
When I exit a trade
I close part of my trade at 138.2% extension line. I close rest of it at 161.8%, sometimes I try to wait for 200% extension line.
Trailing stop line in swing trading strategy
I really think that trailing stop loss is a great tool when you are a swing trader. You can build a whole trading plan around it or you can use it to stay in a trade as long as possible.
In my case, I use it usually when I trade on a higher time frame (4h plus). Then I close part of my trade at extension line and let the rest to ride the wave. ATR is, of course, my exit point. But you can build many trading strategies around it:
There are few common mistakes I can point out.
Too wide stop loss
Stop loss alone is a huge topic. There are many ways you can set it. Learn from others, learn from your trading mistakes. It is a good practice to mark important trendlines, pivots on a chart. This will help you to set stop at better place.
Too many transactions at once
Do not overtrade. Especially when you use leverage. It is easy to place many trades, but you have to be sure what you are doing.
No exit plan or trading plan
You have to base your trading decisions on some plan. Without that there are..
There are few solid strategies you can use when you want to trade Bitcoin and other cryptocurrencies. In this guide, I present you some ideas you can use in your trading.
Averages can be a great help in trending markets. I do not like to trade based on them (I use them only as additional information) but we are talking here about Bitcoin ;).
You can use set of 2-3 averages like
100 and 200,
50 and 200,
50, 100, 200
Like in the example below:
Another option is to put more averages:
The alternative is to use Rainbow:
All these setups with averages can help you to go with a trend and to find possible support and resistance areas. Which one is best for you? Test it.
Trailing stop loss
Trailing stop loss is a great strategy. It allows you to follow trend easily. When you are in profit, you can hold to the trend for a longer period and stop loss line is clear.
I like to join trailing stop loss with other tools which helps me to verify the current trend. In the example below you can see trailing stop joined with Bollinger Bands and 100 average on 5m Bitcoin chart:
From the start, it was clear where to enter and where to close. Settings for this trailing stop are:
Another idea is to join trailing stop loss with averages. They can work both as support/resistance and trend indicator. Thanks to them you have better chances to invest in the right direction.
The best way to trade with trailing stop loss is to trade with the trend. Especially on lower time frames. You just have to wait for best setup of averages and trailing stop loss. Below Bitcoin again, 5m chart:
Settings for this trailing stop:Take a closer look at two charts above. You can see that both are 5m Bitcoin. On both, with trailing stop loss you could catch most of the 1000$ move. All that on a 5m chart! That is the true power of trading with trailing stop loss.
Fibonacci trading works on every time frame but for most traders, it is better to trade on the higher time frame. Especially when you trade Bitcoin or another crypto. Trends are strong here and you can catch bigger moves on higher time frames. Few examples below.
The 4-hour time frame of Bitcoin and simple ABCD trade:
The daily time frame of Bitcoin:
The weekly time frame of Bitcoin:
As you can see, on every one of them you can use Fibonacci to catch big moves.
Of course, Fibonacci works also on lower time frames, even when you trade Bitcoin. Example of 1-minute Bitcoin time frame:
When it comes to extensions, you can use more lines. I stick to most basic ones:
Just like on the chart below:
You can add more like 238.2%, 300%, 361.8% and so on. I prefer to have a cleaner chart that is why I do not put all of them.
Or look for harmonic setups.
MACD oscillator works great when we have trending markets. You look here for two things:
are signal lines above or below 0 line
cross of signal lines
If lines are above 0 line that means that we have better chances for a move up and we look to go long. You open a trade after a cross of signal lines:
Pivot Points are great because they show you where are potential support and resistance areas. You can build a good strategy with that information.
There are many Pivot indicators for Metatrader. I recommend using that one.
When you add Pivot indicator to the chart, you have to decide on which period it will be calculated. Standard is daily but there are many others to choose from:
Do Pivots work on Bitcoin chart? Of course. Just like with any Forex pair, it gives us potential support and resistance levels. Below 15m Bitcoin chart with daily Pivots:
If you trade on 1m or 5m time frames then it can be a good idea to trade with Pivot Points calculated on 1h or 4h. You switch that in settings window which I showed you in the beginning. Below you can see 1m time frame. See how Pivot works when they are calculated on 1h (so every hour we have new Pivot lines). It is clear that Bitcoin price reacts with these levels which can be support or resistance for the Bitcoin price:
If you trade on 5m time frame then it is a good idea to try Pivot Points based on 4-hours period (every 4 hours we have new Pivot lines plotted on chart). Again, Bitcoin price finds support and resistance on these lines. Below 5m Bitcoin chart with Pivot Points plotted every 4 hours:
On charts above you can see that I joined Pivot Points with MACD, Stochastic and averages. You can use other technical tools. I just like to have a confirmation of trend and signal to open and close position. I think that setup above works just fine.
when a price goes near your target (extension line) you close part of a trade (take profit)
move stop loss higher
let the rest of trade run with a trend
Like in the example below:
Pivot lines, Fibonacci, and Bitcoin
If you decided to trade on lower time frames (1h and lower) then it is a good idea to combine Fibonacci with Pivot lines. Below you can see how daily Pivot lines and extension lines helped to select the best exit point:
Ichimoku works best in trending condition. Bitcoin is trending so it is a nice combination of Fibonacci and Ichimoku. You use Ichimoku as a trend indicator. When you see – like below – that trend is up, you look for proper ABCD setup:
You can also use Ichimoku as a signal to enter or exit a trade. For example, a classic break from the cloud would be a good signal:
I would recommend going with longer settings like below:
It will give you a much better picture of current market conditions.
As you know, I use few technical indicators, but the main are Fibonacci Retracement and Extension levels. It is already built in MT4, but you have to configure it so you can use most popular Retracement and Extension levels at one time. Here is how to do it step by step.
1. Where can you find Fibonacci Retracement in MetaTrader4?
Go to top bar and find Fibonacci Retracement icon:
Or you can go to the top menu and select Insert -> Fibonacci -> Retracement:
2. How to change Fibonacci retracement and extension levels?
When you have selected Fibonacci tool described in point 1., draw it on a chart. Now, double click on the line that goes from 0 to 100%:
And click mouse right button. Next, select Fibo properties:
3. Fibonacci retracement and extension levels list
In Fibo properties, go to the second tab. You will find there a table with two columns: Level and Description:
Probably you will see some default values. You can edit fields and add new ones. Correct the list in the second tab so it look like list below:
These are levels that I use in my daily trading. Sure, you can customize this list so it fit your trading style. You can add levels like 261.8, 150 etc. In my experience, you are good to go with the list I provided above: