Best Indicators for Swing Trading in 2022 – Library of Trader

Swing trading indicators can come along and change the whole game as they ease the process but also provide many false signals. Such a double-edged benefit of technical tools makes many swing traders hesitate about whether they should use these indicators. This article offers an exclusive overview of the common technical indicators for swing trading. So, you can learn how to leverage their superior functions to help you earn higher profits from swing trading.

What’s Swing Trading and How Does It Work?

Swing trading indicators a type of fundamental trading where you can hold positions longer than a single day. Technical analysis plays an important role in the development and modification of swing trading strategies.

The Importance of Understanding Swing Trading Indicators

There are three aspects of a trade that you should take into consideration, trends, momentum, and volume. Thus, the help of tools in such areas can help you profitably swing trade no matter how volatile the market is.

Trend Indicators.

Momentum Indicators.

Volume Indicators.

Top Swing Trading Indicators

Moving Averages (MAs)

Moving averages (MAs) are a stock indicator that you typically find in technical analysis. This tool can mitigate short-term fluctuations in stock prices over a specified time frame. So, the price data becomes much more understandable and generates more valuable insights.

Volume

​Volume is also a technical analysis tool that many swing traders use to better analyze the strength of a new trend – whether it can last or not amidst multiple influential factors. The underlying principle is simple: if a trend comes along with a high volume, it shows much more strength than the trend with a weak volume.

Ease of Movement (EOM or EMV)

Ease of Movement indicator clarifies the relationship between price and volume so that the strength of an underlying trend can be under the spotlight. Simply put, the tool helps swing traders determine whether prices can rise, or fall, with little resistance in certain movement directions.

Relative Strength Index (RSI)

Relative strength index is helpful to determine whether a stock’s price is strong or not. So, it is among the crucial momentum indicators in technical analysis. Specifically, it gauges the speed and magnitude of an asset’s recent price changes to assess overvalued or undervalued conditions.

Stochastic Oscillator

Stochastic oscillator is an indicator that has the same operating system as the RSI. It indicates the market movements through the comparison of the closing price of a market to the range of its prices in a specific period.
The difference between a stochastic oscillator with RSI is the inclusion of two lines – one indicates the current value of the oscillator, and another line shows a three-day moving average (MA).

MACD

MACD stands for Moving Average Convergence Divergence. This trend-following momentum indicator points out the relationship between two moving averages of an underlying asset’s price. You can get the result of MACD by subtracting the 26-period EMA from the 12-period EMA.

Bollinger Band

A Bollinger band, a technical analysis tool, entails a group of trendlines with two standard deviations. These deviations are apart from a simple moving average (SMA) of an asset’s price.
A well-known technical trader, John Bollinger, was the man behind this tool. He developed this tool to uncover the opportunities that enable swing traders and investors to accurately identify the timing of an overbought/oversold asset.

Bullish Candlestick Reversal Patterns

There are five powerful patterns that showcase bullish candlestick reversals, such as hammer, piercing, bullish engulfing, morning star, and three white soldiers.

The creation of a hammer pattern takes place when the open and close prices meet each other. It comprises a lower shadow that is twice as long as the real body.

Piercing pattern is a candlestick pattern that offers us potential bullish reversal signs near the support levels when a downtrend ends.

Bullish engulfing informs a potential reversal from a downtrend as more buyers join the market and move the prices up after a long period of downward movement.

Morningstar is a triple pattern of candlesticks telling us a bullish reversal in advance. In other words, it warns us of the upcoming uptrends.

Three white soldiers, also a bullish candlestick pattern, takes place at the end of a downtrend and showcases a bullish reversal. It includes three long bullish candlesticks that are green in color but not long shadows.

Other Indicators used for Swing Trading

Support and Resistance

Support and resistance refer to areas on a market’s chart with challenges of crossing. They create the basis of main technical strategies for many trading types, and swing trading is no exception.

Patterns

There are many swing trading patterns that you can use as hints for potential uptrends and reversals.

Wedges help you identify reversals. If a wedge falls on a falling market or rises on a rising market, it can be a signal of an upcoming price reversal.

Pennants can be a factor leading to new breakouts as the market consolidates after a considerable price action.

Triangles are a precursor to a breakout in the case of the pattern’s invalidation.

Standard head and shoulders are the pre-ups for bear markets. Meanwhile, inverse ones can be the beginning of uptrends.

How to Start Using Swing Trading Indicators

These tools will be a great help for swing traders to identify the timing and methods of opening trade or position. You can find optimal entry points with the aid of the signals that the superior features of these tools can offer.

Why Should use Swing Trading Indicators

The swing trading indicators that we introduce in this article are the basic tools that many swing traders have used to better their trades. You can see those indicators showcase three primary dimensions of a trade, including trend strength, momentum, and volumes.
Article Source: https://libraryoftrader.net/swing-trading-indicators