Swing Trading Indicators

Swing Trading Indicators

7 min read

Swing trading indicators can be very helpful to use when trading because they show important support and resistance levels and trend changes. Some of the popular indicators include the 50 sma, 100 sma, and 200 sma, also known as simple moving average lines. Other popular indicators include RSI, and MACD. However, it’s important to not get bogged down by them, they are not foolproof, because most of them are lagging indicators. 

Do you use swing trading indicators? They paint a picture and are part of a system that can dictate how to trade. When you’re swing trading, you’re buying and holding a stock for more than a day. A typical swing trade lasts anywhere from 3-6 days up to a few weeks. Occasionally, our team will hold a little bit longer, say a few months, if the trend is in-tact.

The indicators are going to tell you if you want to be bullish or bearish with your trade. They charts, and thus indicators on the chart interpret the trend and direction a stock is moving. They also help determine if the trend should continue, or if a possible reversal is nearby. Swing trading options is a great way to profit when you know the direction that a stock is heading. 

Swing trading techniques work best in stable markets where the trend is clear. You can ride the stock up and down when you swing trade.

Swing trading indicators tell you which way to ride. The choppier the market, the more difficult the trade, typically. Some traders like choppy markets to sell options and collect premium. 

The swing trading indicators may not work like you think they should causing you to move away from them. Especially so when you’re new to trading and learning how these things work. You can get discouraged and quit.

You need to have a group of people who have your back, or good information, and get experience. Paper trading is a great way to start out. learn the mechanics of trading before risking any capital.

No indicator no matter how simple or advanced tells the future of the markets. Trading is a all about managing risk. But the indicators can give you a picture of the probability of its heading.

Basic Swing Trading Indicators

The relative strength index or RSI is a momentum indicator. It’s providing the strength of price performance. Not only does it tell you if a stock is oversold but also overbought. Combining RSI with other indicators can help you confirm your entries and exits on trading.

When a stock is oversold it’s selling at a price that’s typically lower than the actual value of a stock, and due for a bounce. A price reversal is coming so most people like buying a stock when it’s oversold. Swing traders and investors use it so they get more bang for their buck.

When a stock is overbought it’s in a constant upward trend. If the RSI is showing that a stock is overbought, you know you don’t want to enter at those prices because a correction is coming.

Stocks that are typically above 80 are considered overbought, the more over 80, the more extreme the overbought levels.

The bottom line is…the price of the stock is going to come down, eventually. And confirming with RSI is helpful for swing traders, We use these swing trading signals to find entries as well as exits.

MACD Indicator

Moving Average Convergence Divergence

Swing trading indicators like the moving average convergence divergence or MACD is also a momentum indicator. It’s a trigger for buy or sell signals.

MACD crossovers show what territory a stock is headed to. MACD is considered a lagging indicator. It’s not going to update quite as fast as price action.

Though, some traders like to adjust MACD values beyond the default so they can get quicker or slower readings on the MACD…something to play with for sure.

MACD reveals changes in direction, trend and strength of a stocks price.

Traders will wait until a confirmed cross has happened to avoid a fake out. When a cross happens it doesn’t mean it’s going to go flying up. Sometimes it’s a slow grind before a pop up.

Swing Trading Indicators

Moving Averages

Swing trading indicators like moving averages are used to smooth out price movements in the shot term. Moving averages can show long term trends.

Moving average crossovers with the 50 and 200 SMAs are the best swing trading indicators out of the moving averages. You can use the 9 and 20 EMAs but that works better for intra day trading, or short term swing trading (a couple days).

Use these moving averages as support and resistance. You never want to but a stock at resistance unless you’re shorting it. VWAP is another great tool for support and resistance.

50 day and 200 day moving averages as major daily resistance or support zones. If a stock is below these averages,  it’s typically considered in a bearish trend. Above,  its a bullish trend.  

Moving average crossovers can identify the end of a trade and when to enter or exit. Swing trading allows you to ride the multi day wave. The “Golden Cross” Is when a 50 Day moving average crosses over the top of a 200 Day moving average. Some people scan for this specifically and buy stocks that are crossing in this way for swing trading.

Ride the move up, get out and ride it back down. Play with observing your favorite moving average crossovers and see what kind of results you get. 

Look for 5SMA crossing over 10SMA’s for short term swing trades.

Best Indicators for Swing Trading

Some people like certain moving average crossovers more than others. We scan for specific criteria in making our nightly watch lists and give you guys a customized swing trade watch list to follow.

Always look to trade the momentum of the stock. A stocks price relationship in relationship to the moving average can give a lot of insight to where the stock is headed.

Stocks and Options

Using your swing trading indicators to help you identify the momentum and trend of the stock helps you know which trade to place.

Options are great for swing trading. Knowing the trend help you identify whether or not you want to buy calls or puts.

Swing trading stocks and options is also a fantastic way to get around the PDT rule. Because you’re holding the stock at least overnight the trade doesn’t count against you as a same day trade. PDT can be a bane to traders, so you really need a good strategy to get around it.

Market Actions

Using swing trading indicators keep you from trading blind. Also it keeps you from trading on emotions. Green, red, green.

Stocks change day in day out, so you really need a strong technical system to help keep your emotions in check. You don’t have to guess which way to trade a stock.

Sometimes a new trader starts trading without truly understanding how these indicators can help them. It takes time. Once you are comfortable, knowing how to trade weekly options becomes a profitable strategy.

Don’t rush! Learning trading is a journey of self exploration. You’re going to learn a lot about yourself in the process. Ultimately, have fun and mange risk. Play is safe!

Sometimes new traders stop using them because they didn’t work out the way they thought they should. Or new traders switch from indicator to indicator, looking for the holy grail that will make it all simple.

They aren’t perfect. But the swing trading indicators help dissect the markets actions so you can make an informed trade. It’s not an exact science but it sure helps!

If you need more help, take our swing trading course.

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