What are the Best Swing Trading Indicators?

Moving averages are some of the simplest and best swing trading indicators. Their purpose is to paint a clear picture of the trend of a security by smoothing out price action. Bollinger Bands are a trio of lines comprising an upper band, a lower band, and the simple moving average (SMA) line indicators for swing trading of the asset price. The upper and lower bands represent the positive and negative standard deviations of the SMA and are a great way to measure market volatility. The bands expand farther away from the SMA when there is high volatility and contract closer to the SMA when volatility is low.

In other words, the RSI is used primarily to help traders identify momentum, overbought and oversold market conditions, as well as divergence and hidden divergence signals in markets. Despite the fact that the concept of swing trading has recently been on everyone’s lips, it appeared quite a long time ago. Douglas Taylor in his book “The Taylor Trading Technique.” He considered the wave movement of the market, highlighting the daily cycles on it and dividing them into separate sections.

The main goal of swing trading

The momentum indicator works in a similar way as the breadth indicator above, moving from overbought to oversold. The last benefit of using a simple swing trading strategy is that you won’t need to be glued to the screen for the whole day like with day trading strategies. A swing trading plan https://investmentsanalysis.info/ will work in all markets starting from stocks, commodities, Forex currencies, and much more. If you are interested in learning about other methods of trading our Trading Strategy master post is a great resource. The third benefit of swing trading relies on the use of technical indicators.

Now that you know the three different types, we’re ready to unveil our list of the best swing trading indicators. These are the basics that any beginner should know, as you’ll still use them as an experienced trader. It is important to make sure you have a fully developed training plan before starting to trade any swing trading system.

Assess Overall Market Conditions With Ease

This involves looking for trade setups that tend to lead to predictable movements in the asset’s price. The more favorable the risk/reward of a trading strategy, the fewer times it needs to win to produce an overall profit over many trades. The distinction between swing trading and day trading is usually the holding time for positions.

Thus, traders will be aiming to determine when a price is likely to move next before entering the position, in order to capture any potential profit from the respective move. The simplest definition is that swing trading is a trading style that utilizes technical analysis in an attempt to capture gains in a traded security over a period of a few days to several weeks. The goal here is to identify an overall trend and ride it to capture larger gains than is normally attainable in an intraday trading time frame. Depending on the specific asset you’re trading, certain strategies may present more advantages over others. If you’ve been trading stocks for a while, you’ve likely heard of day trading and position trading. The other involves holding a position for an extended period of time.

Final Word: Best Indicator for Swing Trading

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. Swing trading is one of the most popular trading techniques out there.

This is exactly what enabled Jesse Livermore to earn most of his fortune. The next step is to identify the bearish or bullish trend and look for reversals. Beginner traders should start with our comprehensive beginner’s guide to financial markets. I named the price overlay study the 350 swing indicator (see sidebar “350 Swing Indicator”). Decreasing the lookback period increases the indicators’ sensitivity to smaller price moves — sometimes too much.

Swing Trading Indicator #1: Donchian Channel

First we have the actual price chart – but there’s a whole lot of ups and downs and little squiggles when we look at that line. It can be easy to get lost in the minute-by-minute fluctuations of a price. But when we look at those nice smooth moving average lines, the trend of the price becomes pretty clear. While you can absolutely have a favorite indicator, it’s a good idea to get to know several and use multiple indicators before entering or exiting a trade.

• Swing trading is an alternative strategy for those who favour short-term trading, but can’t dedicate hours to trading every day.
• Swing traders remain in the trade as long as the trade is still profitable.
• It means that your results are more tied to your understanding of the indicator than the indicator itself.
• If the market does then move beyond that area, it often leads to a breakout.
• Relative strength index is a momentum indicator that shows if the market is oversold or overbought, sending entry and exit signals
  to the swing traders.
• Another excellent swing trading indicator is the Compound Breakout Tool.

Using the MACD indicator for swing trading to decide when to buy or sell is pretty simple. The bottom line is that it depends on which type of swing trading indicators resonates with you the most; the best one for you. The indicator functions according to percentage increases in price movements. In other words, let’s say that you’re interested in 15% price movements. When looking at an ABCD pattern, the price highs and lows are represented by each letter, making it a straightforward way to visually find the requisite information quickly. Typically, there are 3-13 bars/candles between each letter, and traders can use the Fibonacci retracement tool to identify support and resistance levels (i.e., the legs between the different letters).

Start swing trading today for increased profits and decreased time commitment

While it gives you access to the same type of information as the relative strength index, it does so using different mathematical models. You’ll look at the same range as the RSI, but the overbought and oversold levels fall at 80 and 20 respectively. High volume means a strong trend, whereas weak volume indicates a weak trend. With the best swing trading indicators, you can make accurate predictions about what a stock will do.