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Best Indicators for Swing Trading in 2021

07.05.2021

Every job requires the right tools as each tool is precisely designed for a specific purpose. In crypto trading, trading indicators are the tools. Best indicators for swing trading have always been a hot topic. Rightfully so. It’s an efficient method for trading crypto.

Read on to find out what the best indicators for swing trading in 2021 are.

Swing Trading vs Day Trading

What is Day Trading?

Trading means buying and selling assets with the aim of making a profit. Institutional trading looks at buying and selling stock, shares, and currencies. Trading cryptocurrencies means buying and selling digital assets. The main aim remains the same in both worlds – returning a profit. 

So, when does trading become day trading? This is usually determined by the time a trader holds an asset. Day trading means buying and selling assets within a very short timeframe. This could be anything from a few seconds to a few hours.

How Does Swing Trading Differ?

The key indicator between day and swing trading is time. Swing trading is also fast paced. Yet, trades are slightly longer than with day trading. Traders will hold onto assets for a few days to a week.

Swing trading has a slower pace and gives traders more time to understand the process. This means more opportunities for research before executing trades. This is one of the main reasons why it’s a popular method among newcomer traders.

Next, you can learn everything you need to know about swing trading in our most comprehensive guide.

Best Indicators for Swing Trading for 2021

Trading indicators are tools used for increasing trading efficiency. They help traders analyze the price direction of an asset.

Trading indicators are helpful in both long and short-term price analysis. Look at them as calculations. They signal the events that are bound to happen in the trading market.

Probably the best thing is that there are tons of trading indicators available. You can choose them based on your preferences and experience.

What are the best indicators for swing trading in 2021? Check out our top picks. Before you do that, have a look at Best Indicators for Swing Trading in 2020 to see what’s changed.

1. Moving Averages

Moving averages are a popular category of trading indicators that vary on complexity and purpose. MAs derive from historic prices. In other words, they filter out unnecessary information from short-term price fluctuations. This helps to smooth out price action and get a better overview. 

Moving averages focus on trend-following. Also, they help determine support and resistance levels. As mentioned before, there are many variations available.

Simple Moving Average (SMA) takes the arithmetic mean of a set of prices over a given time. Exponential moving averages (EMA) use a weighted average. This gives higher importance to more recent days. Moving Average Convergence Divergence (MACD) monitors the relationship between two moving averages. A common MACD calculation subtracts a 26-day EMA, or the Exponential Moving Average of the asset, from a 12-day EMA.

We love the MACD. It helps you identify and prepare for profit opportunities, which is exactly what makes it one of the best trading indicators.

2. Relative Strength Index (RSI)

Relative Strength Index is a popular buzzword among traders. This indicator aims to quantify the gains and losses of an asset over a fixed period of time.

Why is the RSI a good fit for swing trading? It provides you with the information for timing your market entry and is beneficial for investigating short signals. The RSI gives better insights for this than other indicators meaning that traders can tell if an asset is overbought or oversold.

This indicator fits both beginners and pro traders as its use cases are quite universal.

3. Volume

This is a very basic but efficient trading indicator. Volume is often missing from the list of best trading indicators for swing trading. Yet, it shouldn’t be. It is easy to use for beginners and can bring noticeable gains. Volume is particularly important when analyzing trends.

Volume patterns help traders understand the strengths behind price movements. For instance, rising markets with increasing volume are usually strong. But when volumes decrease, trends are also facing a downturn. In conclusion, volume is one of the key indicators in technical analysis.

4. Bollinger Bands

Bollinger Bands help visualize overbought or oversold conditions. This indicator traces back to John Bollinger. He stated that periods of low volatility are often followed by periods of high volatility. As a result, this led to the creation of Bollinger Bands in the 1980. 

Bollinger Bands are curves drawn in and around the price structure. They are defined by a set of lines – the moving average (a middle band), an upper band, and a lower band. The lines help you identify whether the price of an asset is relatively high or low. But how to spot this? Well, the price is relatively high if it is near the upper band. On the other hand, the price is relatively low if it’s nearer to the lower band.

5. Stochastic

Stochastic is a momentum indicator that works similarly to the RSI. The indicator compares the closing price of an asset to the range of its prices over a certain period.

Like the RSI, the Stochastic is represented by a chart between zero and 100. However, the overbought and oversold zones are above the 80 lines and below the 20 lines, respectively. 

As compared to the RSI, this indicator consists of two lines rather than just one. One line shows the current value of Stochastic, and the other one is a three-day MA.

Traders use the Stochastic to determine the overbought and oversold levels. Also, they look for the two lines to cross, which generally anticipates a trend reversal.

Practice makes perfect. Now that you’re up to date with the best indicators for swing trading in 2021, you can polish your trading skills on CoinMetro. Try a demo or sign up for an account to start trading live.