Swing trading is the most popular and effective method of profiting from trading Forex, stocks and other markets. This style of trading is used primarily by large market players such as bank and professional traders. However, to make the most of swing trading you must have an effective system. Without a trading system, you stand no chance of being able to effectively implement swing trading and extract profits from the market. What makes a good trading system? An effective trading system should cover two of the most basic and core components of trading: trend identification and stop loss.



One of the hardest aspects of trading for many people is trend identification. New traders quickly discover this when they find that almost every trade they place seems to be a loser. This feeling of frustration and the inability to place winnings trades stems from them having difficult identifying the main trend. Amazingly, many trading systems fail to address or even help a trader identify the main trend and focus instead on entering and exiting trades. Any effective swing trading system should allow you to identify the trend first before placing trades. Trading against the main trend greatly increases the chance of suffering a loss. Swing traders ideally trade with the trend and it is vital that your system allows you to identify the trend no matter the time frame you trade. Not knowing the trend means any trade you place has a high risk of failure.

Stop losses are also a core component of any good trading system. Like trend identification, some trading systems fail to address how big and where stop losses should be placed. As a result, some traders casually open and place trades without a stop loss, completely unaware of how dangerous this can be. Trading without a stop loss is similar to playing with fire. It is only a matter of time before a sudden market movement caused by unexpected news or some other unforeseen event causes the market to go against an open position you have and you find that all previous winnings are erased in a matter of seconds due to the lack of a stop loss. Your trading system should clearly indicate where and what size your stop loss should be for each trade you place. This helps you to protect not only any profits you may have on the trade but also protects you from losing any profits you have made on previous trades.

There is a wide variety of swing trading systems available online for free or that can be purchased. However, any good swing trading system should help you to identify the major trend and know where to place your stop losses to protect your trading positions and trading capital. When creating your own and looking for trading systems, be sure that any trading system you use covers these two very important areas of swing trading. This will help you to become and profitable and successful swing trader for the long run.