Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Market Strategist for CMS FX. Welcome to another lesson in technical analysis and chart-reading. As always, this is simply for information and educational purposes only.

Today, we're going to be taking a look at swing trading, and that's been quite a popular term recently, but it was also quite popular in the '90s. So swing trading's come back with a vengeance, and a lot of short-term traders are using these methods for capturing short-term probabilities and opportunities in the financial markets.

So what exactly is swing trading? Well, markets often move in swings or waves. And price itself can provide key information on the trend. There are no indicators in this particular method I'm going to show you today, and we're going to be trading with the dominant trend. So swing trading is essentially capturing short-term moves rather than keeping the longer-term positions as buy-and-hold.

We'll take a look at this chart over here. We can clearly see that the first initial phase has been an uptrend, and then we saw a move toward the downside, which is a downtrend, followed by another upswing, followed by a downswing and followed by a further upswing. In this particular chart here, we have higher highs and higher lows. That's telling us that the overall trend is up. So ideally, it would be safe to trade on the long side because the major trend is towards the upside.

Now, if you're a higher-risk trader and a very short-term trader, of course you can take the downswing. That's entirely up to you. But as I said, it would be safer to trade with the dominant trend, which in this case we can see is towards the upside.

Now, if we take a look at the chart and overlay this analysis, we can see that the FTSE 100 weekly chart had a nice move towards the upside, followed by a short-term correction - which was a downtrend. Then again reversed towards the upside for a larger-degree trend. Then a move toward the downside followed by a move toward the upside.

Now, compare the downswings to the upswings, we can see they're actually smaller comparatively to the upswings. And that's what you tend to get when the market's in a trend phase. You'll always get the dominant trend giving you much bigger moves.

But there are still pockets of opportunity in these moves toward the downside, if you combine this with day trading. So in other words, if you take a look at this move over here, the first down move, there is enough points in there if you're looking for a very, very small snippet out of the market.

So what exactly are we looking to do? Well, we'll move into this particular chart here, which is showing us zoomed in what we're really, really looking for. Now, an uptrend, what we're going to be looking for is the market to come toward the downside. And you'll see that the middle bar is actually a lower low. The third bar is a higher low, followed by a higher high. And this is what I call a pivot change.

Now, at this point here, what we want to do is to see a break above that bar, which would initiate a buy position. If we take a look at a downtrend, a change in a downtrend, we can see the market has been moving higher. The middle bar has given us a higher high and a higher low. But the third bar has given us a lower high and a lower low. That would suggest that there's a possible change in the direction of the trend.

If the market breaks below the low of the third bar, that would indicate that there's a confirmation of the move.

So, for example, here, what we're looking at is the charting software to help us to determine that there's a changing trend. The blue bar signifies that the weeks and the days had been toward the upside - to positive closes. And the red bars indicate negative closes. But if we zoom right in, where we've got this potential turning trend where it says downtrend, we can see a red bar there. The next bar actually took the low out, which indicated a sell signal, but we would have been stopped out with a move just above the recent high. So that was a failure, and that's why we can try to avoid these on the large-degree trends unless you're short-term trading of course.

But take a look at this bigger move here. We can see, again, another pivot bar setup. The market had taken out the second blue bar, but it hadn't stopped us out over here. So there's been a nice move towards the upside. Then, of course, we saw another pivot change. The market had taken out the third bar's low - the second red bar, actually - and then there was a nice, short-term move towards the downside.

Notice the two blue bars. Once the second blue bar has been taken out, this is signifying that there's a change towards the upside, of changing trend. And then, of course, the market moved up for several price bars.

So sometimes software can be useful in helping us to clearly see what the picture is. Right now, however, we can see that the second red bar had been broken, and of course we saw the recent sharp drop in the FTSE and the US Dow Jones. So again, there's a nice move there.

So, you ideally want to wait for a pivot to form, and then if the market continues above the pivot, of course, on the buy side, and below the pivot on a downside, then the trade has been confirmed. Use a lower-term timeframe for short-term trading. So if you're looking at weekly charts, you can also combine that with daily charts. And if you're looking at daily charts, you can combine that with the hourly and also the four-hourly charts.

I hope you've enjoyed this lesson. This is Sandy Jadeja, and I look forward to seeing you in the next lesson of technical analysis. Have a great trading week.