I have had a few questions lately from students regarding the difference between swing trading and day trading. At its core swing trading means holding for a few days or weeks while in day trading you execute the trade and close it in the same day. You may use the same strategy for either time frame.
Let’s take a look at the usd/jpy 4 hour chart. If you intend to swing trade you MUST use a higher time frame such as the 4 hour or daily chart.
Here I am going to demonstrate a very simple strategy with a 5day ema and a 16 day ema. When the 5 day ema crosses the 16 day ema that is indicative of a change of direction, it is not certain which is why you must wait until a candle has printed over the 16 day ema to confirm this direction change. The entry is the subsequent retrace and touch of the 16 day ema.
The stop loss position would be at the first obvious point of support / resistance
The strategy here is to stay in the trade until the 5ema crosses the 16 or (and) the price prints above the 16 day ema. In the first example here that shows a return of 390 points for a 12 day swing trading plan.
Move swing trading stop loss position
In a trend the price action will make a series of swing points, in this bullish example from 19 /4 we make 3 swing low points. The stop strategy is to move your stop first from the initial stop to the first swing point and then move it up at each swing point. This is important as you can see at the last swing point when soon after there was a catastrophic failure in price, you would have been stopped out at the last swing and still made a good profit from the trade.
For a day trading strategy you need to be operating in a lower time frame. I suggest 30 minutes as it cuts out a lot of the ‘noise’ that you get from the 5 and 10 minute time frames.
So here we are on the 30 minute chart of the same usd/jpy pair 3-4 may 2016. There are many more opportunities to enter on a 30 minute chart as the price action hits the 16 day ema more often, however there are more decisions to make and the risk of getting the trade direction wrong is higher. You can move the stop along with the swing points as we did in the swing trading example, however if day trading you must close by 4.30 pm as that it the London close.
This strategy is not one we teach on our course as it can be a bit unreliable . We teach a plan which is designed to take advantage of the novice and inexperienced trader.
If you are interested in swing trading or day trading then click the link below to our course, which is over an hour of quality video strategy, a workbook to complete which is critiqued by us and a Skype 45 minute 1-2-1 mentoring call with me to ensure you fully understand it.