Secrets of Forex Swing Trading Success from Frankie Law
Let’s get acquainted with Frankie Law, a forex trader with a swing trading approach capable of “juggling” HKD 200,000 to HKD 6,000,000.
Are you interested in learning swing trading because it does not fit in with scalping techniques? Introduce Frankie Law, a forex trader by means of swing trading that is able to “turn” HKD (Hongkong Dollar) 200,000 to HKD 6,000,000. Interested to listen to the tips and tricks of his trading system? Let’s finish it!
The specialty of Frankie Law is to rely on a swing trading approach to generate profits simply by looking at price action . So, if you like the simple chart display (no stack of indicators), it could be a way of swing trading is worth your try!
Important Points of Swing Trading Management
Frankie Law started trading activity after working as a broker for two years. In that period, he accumulated capital to start trading. Initially he chose to trade on the Hang Seng Index and gold futures, but after the market collapse in 1987, he tried to enter the currency market (Forex).
First time plunge into the Forex, Frankie Law does not necessarily gain profit. He has to face repeated failures before finding a reliable trading system. On the way, he realized how important the stop-loss function is.
A. Stop Loss
In practice trading positions do not always match our predictions. Situations like that we can not at all avoid during the position of walking. Therefore, Stop Loss is most useless to stop losses before wears out the capital.
Next, Frankie had a big loss because of his decision to do Average Down at the time the price of a currency fell. The technique is not at all advisable if you have limited capital and can not bear the big drawdown .
B. Avoid Average Down
The Average Down action is the process of injecting fresh funds into the account to open a buy back position after the price falls from the initial buy position.
On paper, Average Down could be bringing a profit if the price turns up again based on the assumption that you continue to buy the price with a decreasing average. But in practice, the action actually worsen your losses because the price continues to decline while your margin can not afford to bear the bigger drawdown again.
Along with the development of trading system, Frankie Law also use an alarm or beeper to inform if the price has touched the point of resistance or important support. Alarms are very useful when we can not monitor price changes on screen every time.
C. Resistance and Support
It is important to know when prices touch resistance and support . If you are a swing trader, usually a buy position will be opened when the price touches the support limit of an uptrend. Instead, the sell position is held when the price touches the resistance limit of the previous downtrend. The expectation of that position is the change of direction of swinging price again before entering the consolidation stage.
How To Swing Trading like Frankie Law
Once you understand all three points above, you can try to practice swing trading on demo account first before plunge into live trading.
Swing trading as the name suggests, is our skill in looking at the price action to detect where the “swing point” is likely to occur. Swing points or hotspots generally occur when a trend runs to touch the price point of resistance or support like the example image below:
In the picture above, the first red circle (from left) is clearly visible unable to penetrate the price of resistance. As a consequence, the price of free fall (shown as “down-swing”). Well, consider the position of the two blue bars near the support line. The more often the price “bounces” from the support line, the stronger the next price bounces back. Evident from the blue circle, the price instantly swings upward.
Remember, as a swing trader, you must be observant and alert to market conditions, especially when the price touches the key-resistance or key-support point like the example above. If you can not monitor the screen at any time due to certain activities, imitate Frankie Law. He uses an alarm or beeper system where warnings or notifications will be sent on a smartphone (personal portable tool) whenever the price has touched the resistance / support limit according to our terms.
Secondly, once you decide to open positions based on the signal from the price action analysis, identify the true volatility of the target pair. Frankie Law uses a ranking system in order to minimize risk and maximize profit .
For example in pair A daily volatility can reach 100 pips / day. If you plan to swing trading for only a full day (approximately 1×24 hours), note that the ranking system classifies pip gain into a percentage as follows;
- 25% -33% volatility, for example pair A is observed to have 100 pips / day volatility, then the profit target of 25% -33% or 25-33 pips is relatively easier to achieve. It is recommended if you want to open a position with relatively little risk.
- 34% -75% volatility, same as above, only 34% -75% pips distance is relatively difficult to achieve. Extra careful with trailing stop loss.
- 76% -90% volatility, Raihan pip most difficult to achieve. Not recommended unless you are able to bear the risks.
The ranking system above can also be applied in weekly or monthly volatility.
Third, Frankie Law is always reminded to lock in profitability according to the ranking system as well. Suppose you open a position with TP about 300 pips.Put the first TP at 100 pips (about 30%), second TP at 200 pips (about 70%), and last on the top. This is done so that your position does not suffer huge losses when prices change direction before reaching the highest point that is often the most difficult to achieve.
That’s the method of Frankie Law to be able to achieve consistent profits by way of swing trading. Practice yourself to try its efficacy!