Back

Learning Lab: Best Indicators for Swing Trading

29.11.2022

 

There are many ways to benefit from the diverse asset markets. Some people manage to have success by trading short and medium time intervals. To be able to precisely identify suitable trades and choose the best entry and exit points, you rely on certain market signals such as swing trading indicators. Today, our Learning Lab dives deep into the best indicators for swing trading. Take note and use them to your advantage!

 

What Is Swing Trading?

Swing trading is a style aimed at taking advantage of short to medium-term market behavior. In swing trading, a tradable asset is held for a couple of days or weeks, in an effort to profit from even small price swings.

 

This is exactly where trading indicators come into play – to help traders identify opportunities and benefit from upward / downward price trajectories.

 

Why Use Trading Indicators?

Trading indicators are tools for reading the markets and improving efficiency. They can help you determine an asset’s price direction. You can think of trading indicators as calculations for both long and short-term price analysis. They give warning of impending positive or negative occurrences in the trading market.

 

What do trading indicators actually measure more specifically? Nearly anything pertaining to cryptocurrency movements: volume, trend direction, momentum, and other elements. Let’s have a deeper look at how you can learn to read the markets:

 

Volume – the volume of trading activity for a specific financial asset across time

 

Trend – indicates what direction the market is moving in, if there is a trend at all

 

Momentum – the velocity of change in the price of a financial asset

 

 

Best Indicators for Swing Trading

Moving Averages (MAs)

A popular category of trading indicators that varies in complexity and use is moving averages that derive from historic prices. Put differently, they remove irrelevant information from short-term price fluctuations. This aids in improving the overview and smoothing out price movement.

 

Moving averages emphasize following trends. They also aid in determining the levels of support and opposition. As previously said, there are many variations of MAs. Let us have a look at some of them.

 

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, which gives higher importance to more recent days. 

 

Moving Average Convergence Divergence (MACD) monitors the relationship between two moving averages and helps you identify and prepare for profit opportunities, which is exactly what makes it one of the best swing trading indicators available. A common MACD calculation subtracts a 26-day EMA, or the Exponential Moving Average of the asset, from a 12-day EMA.

 

 

Relative Strength Index (RSI)

“Relative Strength Index” is a popular term among traders. This indicator seeks to calculate an asset’s gains and losses over a predetermined amount of time.

 

What makes RSI a good swing trading indicator? You can use it to research short signals and get the data you need to time your market entry. Traders can determine whether an asset is overbought or oversold by using RSI, which provides superior insights as compared with other indicators.

 

Due to its numerous applications, this indicator is suitable for both novice and experienced traders.

 

 

Volume

The Volume trading indicator is very straightforward yet effective. It is crucial when examining trends and is relevant for beginners and pros alike. Traders can better understand price fluctuations by analyzing volume trends. For example, rising markets with increasing volume are usually strong. But when volumes decrease, trends also face a downturn, which makes volume one of the key indicators in technical analysis.

 

Bollinger Bands

In order to visualize overbought or oversold conditions, traders use Bollinger Bands. The originator of this indicator, John Bollinger, noticed that high volatility periods frequently follow periods of low volatility. As a result, Bollinger Bands were developed in the 1980s.

 

Curves are drawn inside and outside the price structure to form Bollinger Bands. A group of lines – the moving average (a middle band), an upper band, and a lower band – characterize them. You can use the lines to determine whether an asset’s price is generally high or low. But how can you tell? If the price is close to the upper band, it is high. On the other hand, if the price is closer to the lower limit, it is low.

 

Stochastic

Stochastic is a momentum indicator that functions similarly to the RSI. This trading indicator created by George Lane evaluates an asset’s closing price in relation to the price distribution over a specified time period.

 

For a trader, it plays a crucial part in technical analysis by allowing one to correctly forecast the entry and exit pricing for a trade. Stochastic indicators provide trading signals that are generally reliable, yet they work best when combined with one or more additional technical indicators.

 

Practice Makes Perfect

Now that you are up to date with the best indicators for swing trading, you can put your knowledge to work in a premium trading and investment medium. Try our Demo Platform to hone your trading skills and when you feel confident, Sign-Up for an account with Coinmetro to start trading! Are you an existing user? You can Log-In to your account now.

Feel free to hang around on our Discord and Telegram channels to chat, have fun, and learn something new every day.