Swing Trading Indicators

Best Swing Trading Indicators

7 min read

Swing trading indicators can be helpful because they show important support, resistance levels, and trend changes. Some popular indicators include the 50 sma, 100 sma, and 200 sma, or simple moving average lines. Other popular indicators include RSI and MACD. However, it’s important not to get bogged down by them; they are not foolproof because most 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 buy and hold a stock for over a day. A typical swing trade lasts 3-6 days up to a few weeks. Occasionally, our team will hold a little longer, say a few months, if the trend is intact.

The indicators will tell you if you want to be bullish or bearish with your trade. The charts, and thus indicators on the chart, interpret the trend and direction in which a stock is moving. They also help determine if the trend should continue or if a possible reversal is nearby. Swing trading options are a great way to profit when you know how 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. Typically, the choppier the market, the more difficult the trade. Some traders like choppy markets to sell options and collect premiums. 

The swing trading indicators may not work as you think they should, causing you to move away. Especially 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. 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 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 provides the strength of price performance. Not only does it tell you if a stock is oversold, but it is 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 to get more bang for their buck.

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

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

The bottom line is that the price of the stock is going to come down eventually. Confirming with RSI is helpful for swing traders. We use these swing trading signals to find entries and exits.

Swing Trading Indicators MACD

1. Moving Average Convergence Divergence

Swing trading indicators like the moving average convergence divergence or MACD are also momentum indicators. 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.

However, some traders like to adjust MACD values beyond the default to get quicker or slower readings on the MACD…something to play with.

MACD reveals changes in a stock’s price’s direction, trend, and strength.

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

Swing Trading Indicators

2. Moving Averages

Swing trading indicators like moving averages are used to smooth out price movements in the short 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, which work better for intra-day or short-term swing trading (a couple of days).

Use these moving averages as support and resistance. You never want to buy 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 are major daily resistance or support zones. If a stock is below these averages,  it’s typically considered a bearish trend. Above, it’s 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 crossing 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 10SMAs for short-term swing trades.

Day Trading Course Options Trading Course Futures Trading Course
DESCRIPTION Learn how to read penny stock charts, premarket preparation, target buy and sell zones, scan for stocks to trade, and get ready for live day trading action
Learn how to buy and sell options, assignment options, implement vertical spreads, and the most popular strategies, and prepare for live options trading How to read futures charts, margin requirements, learn the COT report, indicators, and the most popular trading strategies, and prepare for live futures trading

3. Moving Average Crossovers

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 stock price relationship to the moving average can give much insight into where the stock is headed.

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 helps 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 need a good strategy to get around it.

Final Thoughts: Swing Trading Indicators

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

Stocks change daily, so you 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 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 manage risk. Play is safe!

Sometimes, new traders stop using them because they didn’t work out how 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. However, the swing trading indicators help dissect the market’s 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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