Swing Trading Forex with a Small Account Size
In today’s article I’ll introduce you to the concept of swing trading forex with a small account size.
Truth is, every new trader should be starting with a small account size.
This small account is not a limitation, it is in fact a major advantage.
You can perfect your trading discipline while mistakes are cheap, so by the time you trade profitably the wins will be large.
Now let’s talk about how to swing trade forex.
Swing Trading Forex – Reality of a Small Account
Let us now assume you can only start with a $1,000 USD account balance.
Following risk management, you can risk up to 3% of your account on any single trade.
This means you can only expose yourself to a maximum loss of $30 on trades.
But is this enough capital to allow you trade time to work?
Yes, it is. Obviously you will not be able to do a 100 or 200 pip stop loss, so you need to be more surgical.
You will need to watch smaller time frames, like 15 minutes.
While doing your analysis on a larger time frame for swing trading forex, if you commit to making entries on a lower time frame you can pick better levels and set a tighter stop loss in pips.
Swing Trading Forex – Calculating Max Risk per Trade.
In order to calculate your maximum position, I need to use a currency pair for an example.
Let’s take the EURUSD, trading at 1.16077 at the moment.
Assuming we place the stop loss order below the move lows on the 15 minute chart, we are taking a 18.3 pip risk.
This allows us to take a 16,393 unit position long the EUR against the USD. This is demonstrated below:
Swing Trading Forex with Small Account – Risk Management
You can use this Long Position calculator for FOREX for FREE on Trading View.com.
Because you are on a 15 minute time frame, your stop loss will be within 30 pips of a move typically, and if it is not you are likely getting into the trend too late.
Now that you understand how to utilize your small account balance, let’s get into how swing trading FOREX works.
Swing Trading Forex – Multiple Time Frame Analysis
The very first thing you want to do while swing trading forex is to make sure you are analyzing currency pairs on multiple timeframes.
I suggest starting on the weekly chart to identify the overall trend.
Then you can switch to the daily to find what cycle of the trend we are in. Is it an up move, or a pull back, etc.
Daily charts are where I draw my trading zones and levels. Then I wait for the currencies to move into them and show me some qualifiers before I execute a trade.
When your pair hits the daily trading zone, you can then switch to an hourly chart. One hour charts are used to mark intraday buying or selling zones, this is where I actually start to plan the entry.
If you work a full time job, or cannot commit to watching the monitors, you can stay at the one hour time frame for entry.
However, if you can commit a little more attention to swing trading forex, the 15 minute will give you lower risk entries with higher probability of success. But don’t beat yourself up over it, if you can only look at a chart hourly, then that is better than not looking at any at all.
Swing Trading Forex – The Best Tools for Drawing Levels
When it comes time to swing trading forex, forget about indicators and systems. It is all about price action trading in forex.
You need to learn to read the currency charts properly.
Technical analysis is the way to do this, and we have a comprehensive professional course included in all our subscriptions here >
While indicators are great for timing the final entry, they are useless for helping you decide what to trade and where you can expect price to find support or resistance.
By the way, here is hands-down the best trading indicator you should be using >
My favorite tools for drawing support and resistance for swing trading forex are:
- Horizontal support and resistance levels
- Trendlines – ascending, descending, channels, etc
- Volume to price analysis – is volume supporting the trend?
- Chart patterns
- Candlestick patterns
- Fibonacci
None of these are indicators, and all of them are very powerful for reading market sentiment. This translates to quality entry levels, which turns to profitable trades.
Swing Trading Forex – EUR USD Example
In the example above I will show you how to qualify a potential long opportunity on the EUR USD currency pair.
First, let’s start with the bottom right chart, which is a weekly chart:
- Higher highs, and higher lows so far
- Upside momentum has pulled back to prior consolidation support
- 50% Fibonacci support tested
Next, let’s look at the bottom middle, the daily chart. Here you can see the consolidation closer, as buyers and sellers fight to hold their ground.
Price action is looking bearish here still, but buyers are holding off sellers – a sign of reversal to come.
Next we look at the bottom left chart, the hourly. I have identified my hourly support level between the 50 and 61.8% Fibonacci levels. If price falls below this level, my trade setup is invalidated immediately and I move to the next one.
On the top middle chart (15 minutes) I am looking purely for momentum. Looks like the downside momentum is starting to bottom out.
Lastly, my actual trade entry is set on the 5 minute chart at the top left. This includes all my risk management parameters. I have a stop loss below the current low and target at the previous consolidation.
Swing Trading Forex with Small Account Size – EUR USD Example
This is a real time example of how I am swing trading forex successfully. You have to start with a longer term view and narrow in to your actual trade opportunity.
Swing Trading Forex with Small Account Size – Conclusion
Before you become a great trader you must become a great analyst.
This includes being able to take all available information and formulate a view of market sentiment.
Once you can gauge market sentiment, you can convert this to high probability and low risk trade entries with amazing consistency.
If you want to learn how to do technical analysis like a professional trader, check out any of our subscriptions as they all come with the course.
I hope you enjoyed this article and you can apply this to your very own trading strategy.
Good luck and good trading.
If you want to join us in our live trading room, check out the Day Trader package here >
If you prefer to trade more passively, checkout our newsletter, trade ideas and live analysis in the Swing Trader package here >
The information contained in this post is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.
