Weekly Forex Strategy

The foreign currency exchange market, Forex, is popular with day traders, but you can still participate on longer time frames. Weekly Forex trading, also called "swing trading," reduces the frequency of your trades, but also opens you to additional risks. It is possible to build a weekly Forex strategy so you can avoid participating actively, every day. But it is not appropriate for all investors.

Risks

A typical Forex brokerage account in the United States offers 50:1 leverage. This means that a $1,000 account can purchase $50,000 worth of foreign currency. This allows traders to profit handsomely from small fluctuations in exchange rates, and for this reason many Forex traders are day traders. If you open a longer trade and hold onto it overnight or even many days, the chances increase that an exchange rate will move against you. Thus weekly Forex traders should trade with small positions to minimize these risks from volatility.
Charts

A chart can be set to different intervals, and this provides different views of the market. Day traders frequently use small intervals such as a three minute chart. This would form a new bar every three minutes. Weekly Forex traders will often study hourly charts or daily bars, where each new bar on the chart forms every hour or two, or every day. When a trading signal occurs on these longer time frame charts, the context of the trade is a broader view, and the strategy may require holding the trade for a week or more. While the strategies are often similar as in short-term trading, the chart settings determine how long you hold onto the trade.

Trend Lines

Traders of any market learn to study price trends on a chart. For weekly Forex trading, you create an intermediate-term chart, such as a two hour chart, where each bar forms anew after two hours. Then, if prices are rising over the course of many bars, try drawing a straight line that connects all the recent low points on the chart. If three or more of these lows fall along a positively sloped line, you have a valid up trend. Note how prices return to the trend line and bounce off it towards higher prices. Because this is a longer-term chart, the time between these lows on the line can be several days or even weeks. Buying when prices hit the trend line can initiate a weekly trade that leads to profit over the coming days.
Daily Candles

If you instead look at a daily candlestick chart, you can see signals that may also trigger week-long trades. A candlestick chart is a common chart type in any charting software. Set to a daily time frame, each candle represents an entire day of trading in the Forex market. Look for "engulfing" patterns on this chart. If a candle forms and extends both above and below the high and low prices of the previous candle, and is also the opposite color of the previous candle, this is an "engulfment." It shows a significant change in market conditions. Prices often lead higher over the following bars, in the direction of the signaling candle. As this is a daily chart, this could lead to a multi-day or multi-profit.

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