PipHut's Daily Analysis and our SwingPRO system are both based on the trading technique known as swing trading. This article will cover both what swing trading is and how you can swing trade with PipHut.
Swing trading is a powerful forex strategy built upon the market's natural tendency to trend. Our SwingPRO product, designed as an easy to follow swing trading system, involves what we call bounces and breaks.
Lets take a closer look at the two components that make up our SwingPRO system: bounces and breaks.
Break - A break is when price moves above a falling resistance ("resistance break") or below a rising support ("support break"). Price may bounce along that support or resistance for some time before a break occurs, resulting in a trend, but when that line is broken it signals the start of a new trend and price tends to *pop* in the direction of the break. This *pop* is also called a "breakout" or "breakout trade" and is the foundation of our SwingPRO system.
In SwingPRO a resistance break is our long entry and a support break is our short entry. We give our TP and SL for each entry in our Daily Analysis and break signals are sent to your email or SMS instantly for you to act on. When price moves 10 pips above our resistance line (a "resistance break"), or 10 pips below our support line (a "support break") SwingPRO sends out an entry alert.
Lets take a look at an example together.
Swing Trade Example #1: Support Break
Setup Chart: The price has been bouncing along rising trend support for hours - when price finally moves below that support line it is considered a "support break" and a signal is generated in SwingPRO for a short trade:
Result: 140 pips!
PRO Tip: We consider it to be a "false break" when price reverses and closes above or below or break point. For example if price moves above a resistance line and a resistance break is triggered, if that entry candle closes below our entry then it is a false break and we close out our position. This helps keep our losses very small (many times just a few pips). To make it easy SwingPRO sends out a "false break" alert when this happens.
Bounce - A "bounce" is when price touches a support or resistance trend line and "bounces" off the line, continuing with that trend. Bounces ALWAYS occur to form the trending support or resistance line in the first place. Breaks do not always occur. We don't trade bounces in our Daily Analysis much because bounces are best traded for very short time periods (such as scalping) and our daily trades are meant to be more set and forget and last for up to several hours.
SwingPRO again sends you an alert if a bounce occurs (we call them a "proximity alert" as price gets close to a support or resistance line) so that you can take advantage of this normal market tendency, with the support and resistance lines hand-drawn by our PipHut Chief Strategist.
Swing Trade Example #2: Resistance Bounce
See how price "bounces" off this
falling trend resistance line?
If you had entered on any of these bearish "bounces" circled in red above you could have profited. So what happens if we enter short when price reaches our resistance again?
Result: 200 pip "bounce"!
At least five "bounces" occurred off of that single falling resistance line. The trouble for most is drawing the correct support/resistance line and then being able to enter a break in a timely manner. PipHut's SwingPRO offers solutions to both of these problems by providing you hand-drawn charts (no cheap and error-prone automated software here) and then alerting you when these breaks and bounces occur.
PRO Tip #1: Do you see all those yellow support and resistance lines in the two examples below? Those are old S/R lines that have already been broken. Notice how each one could have resulted in a nice breakout or bounce trade? Blue lines are always the current support and resistance lines on our chart. There are always two blue lines: the one on top is the resistance and the one on bottom is the support.
PRO Tip #2: "False break" alerts can also be used as "bounce" signals - sometimes with much greater effect than "proximity alerts"!
Setting TP and SL in Swing Trades
With SwingPRO we detail out the setups we are watching for each day along with our TP and SL for each setup. Below are some of the general guidelines we use when setting our TP and SL for swing trading:
For bounces we generally start with a 25 pip SL and target 25 and then 50 pips (two targets). When the first target is hit we move the SL to break even and let the trade run its course. If we are sitting in front of the trade terminal then we will let the trade run past 50 pips in the profit. If the price does not bounce and breaks the support or resistance then it becomes a break and, unless there is a reason not to, we open a breakout trade.
Of course many traders use bounces to assist with their scalping strategies and so the numbers above are much too large. A common scalping strategy is to collect 5-15 pips per bounce.
We use a single lot for our trades and tighten our SL as the trade progresses to lock in profit and reduce risk. How much we tighten the SL depends on how strong the trend is, how solid the S/R line is and how clean the break was. For example if the trade is with the trend and the S/R was solid we will keep the SL loose to give the trade room to breath (e.g. move to break even after the second target is hit). If the trade is against the trend or the S/R was uneven then we will tighten often to lock in profit and reduce the risk of the trade (e.g. move to break even after first target, tigten on each subsequent target).
The only reason we close a trade early is if the price is obviously beginning to turn back (has stalled out for several candles or a fundamental news event occurs) and we want to lock in profit or if a strong candlestick appears in the opposite direction of our trade. Read more here.
We always close our positions before the weekend. The weekend gap is a 50/50 coin toss and we like to take trades with a greater than 50% success rate :).
Why swing trading works:
Swing trading takes advantage of two very basic characteristics of any market - so basic that many traders overlook them and "overcomplicate their trading" - the fact that markets tend to trend (bounces) and the fact that trends change direction (breaks).
Two reasons traders fail at swing trading:
- They draw bad support / resistance lines - the entire system hinges on being able to correctly identify trends and correctly place the trend lines. A trend line drawn even 10 pips in the wrong direction can make the difference between your SL being hit or your TP being hit.
- They miss trades - Even if you can draw the correct line many traders, especially those just starting out, can't sit in front of their computers all day so they miss most of these break and bounce opportunities.
How SwingPRO solves these problems:
- Hand-drawn Support and Resistance lines - PipHut hand draws accurate support and resistance lines on charts you can access 24 hours a day, 7 days a week. These charts are updated every 10 minutes so you can always see where the latest S/R lines are:
- Email and SMS alerts - When price gets within 10 pips of a support or resistance lines (bounce) or breaks an S/R line by 10 pips (break) we send you an email right away. Most members receive these emails within 20 seconds! Perfect if you can't or don't want to be constantly sitting in front of your computer.
- Multiple Pairs - Select whether you want to receive bounce alerts, break alerts or both for up to five different pairs (EU, UJ, AU, GU and UChf). Increase the # of trading opportunities tou have each trading day
- Daily Guidance - Get daily analysis on all five pairs from our Chief Strategist, alerting you to which S/R lines we are watching closely and which lines we expect to be the most profitable.
- 24/7 Support - We offer all our members 24/7 priority email support. Official policy is a response with 12 business hours but most members receive a response within 10 minutes.