The 150/50 Swing Trading Strategy in Practice
The chart above shows a chart for the EUR/USD currency pair. Using this example, we would like to explain the swing trading strategy in more detail. Please do not take this as a trading recommendation. The example only serves to clarify the necessary conditions. It also makes it clear how to set take profit and stop loss. In the chart, the conditions for a long trade based on the wing trading strategy are fulfilled.
- The price is above the 50-day line and a higher high is formed.
- The green 50 percent retracement mark is also above the 50-day line
- Now the middle distance of the last impulsive wave can be sought. If the 50 percent retracement is touched, the entry is made with a limit order.
The stop loss is set slightly below the impulsive wave. Finally, define the take profit level. This results from the 150 percent extension of the impulsive wave.
CFD Trading on the DAX
The DAX is a very popular underlying for CFD traders. You can mt4 download and try it on your own. Therefore, we would like to show an example of a long and short trade on the German leading index. To make the whole thing clearer, the long trade is marked in brown and the short trade in blue.
The DAX crosses the 50-day line in mid-October and reaches a new high. The trader now enters with a long position at the 50 percent retracement mark of the previous move. However, the take profit level was not reached on this trade, so that it was finally stopped out in January.
The DAX remained below the 50-day line in February, reaching a new low. The entry is again at the 50 percent retracement level. The stop loss is just above this. The take profit is defined by the 150 percent extension mark, which is no longer visible in the chart.
If you pay attention to higher-level important chart marks when trading, you can improve the probability of occurrence of the generated take profits. In certain situations it makes sense to check the trade on the basis of the CRF. If necessary, the setup can be easily adjusted.
Conclusion on the 50/150 Swing Trading Strategy
A swing trading strategy with CFDs requires a significantly lower capital investment than a direct investment. This means that the desired performance can be achieved within a shorter period of time. At the same time, trading with CFDs enables effective risk management. With a guaranteed stop loss, the risk can be limited very effectively. In addition, CFDs offer the advantage in a swing trading strategy that traders can go both long and short. Every trend can therefore be used for a trade. As with all investments, however, the same applies here: Those who get higher chances with a lower capital investment must also take a greater risk in the process. In CFD trading, the loss can be higher than the capital invested in the worst case.
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