Swing trading is a style of trading where positions are typically held for a period longer than one day. In terms of the time frame, swing trading sits between day trading and trend trading. While swing trading can certainly be profitable, navigating the markets on a relatively short time frame can be difficult compared to just buying and holding assets over the long term. Thankfully, making sense of what’s happening becomes much easier if you use the right indicators. In this article, we’re showcasing the best indicators for swing trading.Without further ado, let’s go ahead with our list of the best indicators commonly used by swing traders. These indicators will help you confirm that a bullish or bearish trend is likely to continue, or identify signs of a reversal in the market. A moving average provides the average closing price of an asset over a selected time frame, which is divided into a number of periods of the same length. For example, a stock’s 12-day simple moving average (SMA) is calculated by taking the sum of the stock’s closing prices over the last 12 days and dividing it by 12. A swing trader might use moving averages as an indicator to identify the direction of the market trend and to signal potential entry or exit points. By tracking the moving averages of different periods (for example 50-day and 200-day) on a chart, a trader can look for crossovers as signals.When a shorter-term moving average crosses above a longer-term one, it suggests a potential upward trend, indicating a possible entry point. On the other hand, if the shorter-term average crosses below the longer-term average, it suggests a downward trend, signaling a possible exit or short-selling opportunity. Moving averages help smooth out price data over time, making it easier to spot trends in the volatile markets swing traders often target.Weekly TSLA chart with 200-day simple moving average (blue) and 50-day simple moving average (orange).RSI is used in investing and trading to measure the strength of an asset’s price action. RSI is a momentum oscillator that compares the magnitude of recent gains to recent losses in order to determine overbought and oversold conditions. The RSI is calculated using a formula that takes into account the average gain and loss over a specified period of time (usually 14 days). When the RSI is above 70, it may signal that the asset is overbought and due for a price correction or reversal, and traders may consider selling. Conversely, when the RSI is below 30, it may signal that the asset is oversold and due for a price bounce or reversal, and traders may consider buying.Bitcoin price chart with the RSI indicator. The RSI crossing above 70 is marked with a green fill, while the RSI crossing below 30 is marked with a red fill. One of the best chart indicators for swing trading are candlestick patterns that suggest an upcoming reversal in the market. Based on these signals, traders can go long on assets that look to be reversing a bearish price trend, or go short on assets that are trending bullish but showing signs of a reversal to the downside.Some of the most commonly analyzed reversal candlestick patterns are wedge formations, which can be divided into falling wedges (bullish reversal) and rising wedges (bearish reversal). Here are some other common examples of candlestick patterns that indicate a reversal in the market. HammerInverted HammerBullish EngulfingMorning StarHanging ManShooting StarBearish EngulfingEvening StarYou can learn more about candlestick patterns with our helpful candlestick pattern cheat sheet. While some traders might not even perceive trading volume as an indicator, it’s actually one of the most important pieces of information when looking for swing trade opportunities in a stock or another asset. Here are some examples of how different ways trading volume can be interpreted as a signal in various scenarios:Volume plays an importantl role in breakout strategies, which come into play when the asset’s price moves beyond an important resistance or support level. A breakout accompanied by high trading volume is a strong indicator that the emerging trend will be significant and sustainable. In such scenarios, high volume provides validation that a large number of traders are participating in the move, increasing the likelihood that the breakout will lead to a pronounced trend in the direction of the break.Not to mention, you should avoid trading assets that have very low trading volume. Trading assets with low liquidity will result in issues such as unpredictable and slow trade execution, and slippage. MACD, which stands for Moving Average Convergence/Divergence, is an oscillator that is visually represented with two lines. MACD is used to confirm trends and find entry points for trades and is generally considered as one of the best technical indicators for swing trading. The MACD indicator is based on the relationship between the 26-period EMA (exponential moving average) and the 12-period EMA. The MACD line is calculated by subtracting the 26-period EMA from the 12 EMA. A nine-period EMA of this MACD line is used as the signal line.The MACD indicator produces signals when the MACD line crosses above or under the signal line. The MACD line crossing above the signal line is considered a bullish signal, while the opposite is true if the MACD line crosses below the signal line. The strength of the signal produced by the MACD indicator depends on how far above or below the signal line the MACD line crosses. Traders using the MACD indicator also often uses the zero line. The MACD crossing above the zero line is usually interpreted as bullish, while a cross under the zero line is generally interpreted as bearish.Example of a MACD indicator used on a daily BTC price chart. The blue line is the MACD line, while the orange line is the signal line. The zero line (dotted black) is also visible. Finding the best combination of indicators for swing trading requires plenty of trial and error. Hopefully, our list of the best indicators for swing trading has given you a solid starting point and highlighted which indicators deserve your attention.If you want to learn more about the topic of trading and chart analysis, make sure to check out our article exploring forex line trading.
