Swing traders use indicators to help identify patterns and when it’s time to buy or sell; these indicators can be moving averages over time, stochastic oscillators, Relative Strength Index, Ease of Movement and so on.
When the short-period MA crosses above the long-period MA, it is bullish momentum is setting up. Besides, RSI below 30 signals oversold that could be soon reversed.
Identify Trends
As the name suggests, swing trading is all about watching and profiting from patterns in an asset’s price movement. To do so traders track support and resistance zones as well as signals that the trend may be forming (triangles, rectangles, flags, pennants etc.).
Swing traders rely on moving averages to flatten out prices and indicate general trend direction, entry points and exit points. They can be used together with measures such as the RSI to help identify overbought or oversold areas which could signal a trend change.
ATR indicator (Swing trade indicator) : Market volatility is calculated by ATR. This enables traders to measure the strength of a market, and how likely they are not to commit mistakes which can lead to loss, as well as forecast price action more accurately than even the Fibonacci sequence. You can even combine the ATR with other indicators such as Fibonacci sequence to make a more accurate forecast of the price movements, so that you don’t get caught unaware by a dramatic price movement.
Determine Entry and Exit Points
With indicators, swing traders can find a direction of market movement and make entry/exit trades. Moving averages can soften volatility and highlight hidden trend and momentum oscillators like RSI are able to spot overbought or oversold zones that can be a warning of a trend change.
Not only can traders use standard indicators, they also have access to other signals such as chart patterns and volume analysis to spot high probability trading pairs. An uptrend engulfing candlestick at key support zones may point to a bullish reversal trigger.
Traders can use the cycles of the industry to figure out when certain industries are going to be boom-bust cycles. Cyclical industries like car production are in high demand when economic growth is strong and lower during economic recessions so using the cycle to analyze industry can give swing traders a better sense of what is going on in the markets and how they should trade.
Set Stop-Loss and Take-Profit Orders
Use of indicators to learn how the trend is moving can help you place stop-loss and take-profit orders in your trades. Moving averages are one of the most commonly used swing trading indicators, they give you a clear look into what’s going on with your price action but also give you some inflection points (if one shorter MA moves higher than another long MA then you have the potential to get an uptrend which prompts you to open a long). MAs can also complement momentum indicators such as the Relative Strength Index (RSI) which alerts you to overbought or oversold trend conditions in real-time.
OBV (on balance volume) can also be used to confirm entries and exits by checking for trends and breakouts, but be careful if you use it as the volume spikes hugely. More accurate indicator would be MACD (moving average convergence divergence) that aggregates SMA and EMA to get a better idea of the strength of trend.
Monitor Multiple Indicators
Signs can tell us a lot about expected price action, when to enter and exit, what is momentum – however, one sign or another can cause inconsistent or unreliable trading. Using multiple signals in tandem can lessen this risk and, conversely, increase the quality of decisions.
One way is by using a tool like Bollinger Bands which have two bands above and below a moving average, alerting market volatility through overbought/oversold levels. The other way would be RSI metrics, which tell us trend strength.
Combining indicators allows traders to get more comprehensive insight into the market – something that can come in handy at times of extreme volatility such as when interest rates go up or political headlines hit.
