Forex Swing Trading And Automation

What is Forex swing trading? By definition, swing trading is targeting profits within one to several days. In other words, using timeframe longer than in day trading, but way shorter than in position trading.  In the day trading, the positions are only kept open during trading session. But as Forex markets are open round the clock, technically, Forex swing trading does not differ from day trading.

Of course, is the trading is done manually, there is an obvious difference. Efficient swing trading requires constant monitoring of open positions, as profit potential is usually smaller there compared to position trading. There a position can be open for weeks or even more so timing of profit taking is less important, and can be done with e.g. day accuracy.

In manual swing trading, we have to leave positions unattended. Which means we have to rely on take profit order trailing of the trading terminal,  which is usually not as efficient as when done by trader itself. The same of course is valid for entering the market. When a trader is resting, the options of entering the markets are limited.

Given our trading strategy is unambiguosly formalized, trading automation easily solves both problems. Here, the trailing of take profit orders can be efficiently done by an algorithm, implementing whatever sophisticated trailing logic a trader might have. Only working faster and reacting immediately. Likewise, the algorithm won’t miss any of the potential market entry opportunities.

Naturally, more realistic semi-automation mode is more reliable as well. The trader can manually make corrections into algorithm activity according to market situation. Basically, this is important in case a of an unexpected technical problem or a software issue. Also we should always be wary of some “black swan” events which can cause unpredictable market reaction. A good example of that can be false tweet about the White House bombing is 2013.

Automated Forex Swing Trading Software

We are developing our automated Forex trading software to be suited for trading swings.   It is designed to run on its own up to 5/24. Keeping positions open over the weekend makes little sense. It can be risky. Markets opening with gap can result in that stops are not even triggered.

During trading week essentially unexpected events are dangerous for the software performance. News releases can be handled by closing orders according to their schedule or not opening new ones in close vicinity. The software is designed so that any trading strategy can be run both in our testbed or plugged to the MetaTrader terminal with a configuration change.

We also develop our Forex strategy testing software suite so that it is able to performs automated testing of swing trading algorithms. Our tests are mainly designed as 5/24.

We also develop automated trading algorithms which use price action approach. The strategies use market top or bottom detection price action.  For the profit taking, we tried several ideas, but haven’t yet decided on the best one.

Apart from the “black swan” events, the only problem with the price action Forex swing trading is whe a powerful trend suddenly begins. See an example. To better handle this situation, we are developing trend price action algorithm.