Turning a Day Trade Into a Swing Trade
Hello traders. Welcome to the Pro Training Course and the fourth module day trades and short term trades. In this lesson we are going to teach you how to turn a day trade into a swing trade and, well, the reason this is important to be is because, well you’re not going to turn the entire day trading into a swing trade where you’re going to do is you are going to try to let the final part of your trade ride. Now to explain to you how we’re going to do it, we’re going to go back again to the U.S. dollar/Canadian dollar chart that we have been working on.
Now we already know that the area of resistance that is in play at the moment is this one right here. The one marked with the peach rectangle. We already said that our targets for this trade were a little bit below this area because we wanted to get the feel of our target, and it really doesn’t matter if the resistance area is all the way up here we have already analyzed the market and this is where our targets belong, for an almost 1:2 risk to reward ratio.
Now what we are going to do is the following, we are going to take profits right here on two thirds of our trade. That’s right two thirds. And the reason we want two thirds and not half of our trade out is because the percentage of time turning our day trade into a swing trade is going to work is less than 50%. So if you use 50% of your entry of the day trade to turn it to a swing trade you are not going to be profitable in the long run on the last part of your trade. So what you are going to do is you’re going to grab and take profit out of the market of two thirds of your position. Right here at 150 pips. That’s roughly $1,000 in profits and you have $500 profit on paper. Okay. As you can see the price went all the way up to the zone and retested it before coming back.
Now we have our stops at break even at this moment now let me put on the stock placement for this trade. And here’s our entry on the dashboard a black line and the stop loss on the dash dotted red line. Now what we’re going to do is we’re going to make a chart of the U.S. dollar/Canadian dollar one hour chart. And what we’re going to do is we’re going to zoom out. And we’re going to zoom out again and the reason we want to zoom out again is because we want to see where the levels that are working against us are. We have one level right here. And I’m going to show you on the historic price action where this (inaudible) report is. You can see that we have tested it once and twice here.
Now I’m going to use historic price action to determine where the next zone is actually this is the entire zone and I am going to put on the final zone what I think the target should go. If we go to the present price action you can see that this zone aligns perfectly with the area that we are that we are currently testing. And the next zone, we just have to modify it to current price action which is right here.
Now this is the one hour chart. And what we’re going to do is I’m going to put these levels on the chart that we are working on. And here is the first area of of the U.S. dollar/Canadian dollar and if I zone out a little bit you can see that we have the second area on the U.S. dollar/Canadian dollar right here. Now we’re going to go back to this chart and what we’re going to do is we’re going to put on a little fibs. Actually we’re going to do them right here. Okay because this is this chart we are working on. So we’re going to do is we’re going to grab the fibs from this high to this low to see where we are, well where we are at the first area of persistence and then we are going to grab Fibonacci from this high to this low to see the second one.
Okay so what we have done here is we have calculated Fibonacci retracement levels from this high to this low and you can see that the weekly pivot aligns perfectly with the 61 8 of the last push or the last leg down. All right, and that the 76 4 is at the top of this level of resistance and we have calculated the Fibonacci retracement level from this high to the low and the 61 80s are right above the area of resistance at the weekly resistance too. Now I know it’s very hard for us to see it because we are so out a little bit so I’m going to zoom in again and I’m going to show you what we are going to do here.
Now, what we did, is we took two thirds of our position right here 150 pips. And we moved our stops a little bit above break even, just ten pips or so above break even actually 17 pips above break even which is fine. Because price can come all the way down here and take us out and continue its downswing. The day trade idea is over and what we’re going to try to do is look for the opportunity to convert it into or turn it into a swing trade. So what we’re going to do is this, when we are going to wait for price to break with the first area of resistance which is this one that aligns with the 61 8 of the move from this high to this low and when it does that, such as in this case, and rejects it, like it has right now, we are going to move our stoppers just above this area.
Now by moving our stops to that area we have locked in a 167 pips which is more than the first target. And what has happened is that price has moved from our entry to the high 280 pips and it has retraced 91 pips, which is fine because we are in the swing trade. Now we don’t care about deep retracements, and what we are going to do is we are going to wait for price to move above these zone. The next zone of resistance which is going to be very hard because we have the weekly pivot under 61 8 that has been really, really rejected. But what we’re going to do is, we’re going to wait for price to break with this area and then retest it back. When that happens we are going to more stops below that zone. When, by moving our stops below that zone, we have locked in 280 pips on one third of our initial position and then again what we are going to do is we are going to finalize our swing trade right below the next area of resistance which is this one right here. Which is excellent because this is about the 50 level of the entire move to the downside, the 50 Fibonacci. So when price breaks with this level and comes to our final target. We would have made a 100 pip day trade into a 460 pip swing trade.