Most useful indicators for swing trading
Swing Trading is a type of trading method that can be used to trade in stocks and options for short term. An Intraday Day trading last for just one trading day, but in Swing Trading positions are normally hold for two to six days, but also in some circumstances it can be hold for two weeks too.
In swing trading a traders has a goal to capture a larger price movement to earn more than a possible uptrend or downtrend in the stock on an intra-day basis. Swing trades usually rely on study of larger time frame charts including the 15 minute, 60 minute, daily charts or weekly charts.
There are lot of novice traders so First of all for them, we will try to explain the meaning of swing trade as this will help them to understand and do the swing trading very easily. Swing trading often called as a short-term trading strategy. Generally traders apply this swing strategy for buying and selling stocks whose technical indicators suggest an bullish or bearish trend for a short term period . Usually Swing trading strategy for one day to one week or two weeks. In swing trading traders cant trade for intraday or for long term, traders has to trade for only short time that is two to three days or two weeks.
The following Chart will give you descriptive idea about swing trading
There are so many indicators in the Nse share market like Super Trend, RSI, Trend Indicator, MACD, Parabolic SAR, Bollinger Bands, Moving average, Momentum Oscillator, Visual Analysis Indicator etc…but according us following indicators are really good for swing traders.
There are Two useful Indicators for Swing trading:
The first useful indictor that a trader should study is the moving average, the focus of the trader while looking at the moving average is to identify and confirm the trend of the stock.
The easiest moving average indicator to use is the simple moving average. It requires that all the closing prices be added up for a specific number of days, and then taking the total and dividing it by the same number. On a graph, it is possible to plot the average so that one can understand what is happening with the market price. A shorter-term moving average is more volatile, then the longer term average.
Relative Strength Index (RSI)
The Next Best Indicator for Swing trading is Relative Strength Index (RSI), its also one of the best technical indicators for swing trading.
Swing Traders normally called Relative Strength Index as RSI and this is a favourite indictor for professional traders in Nse market
This indicator helps a trader to provide information about an ideal position for enter in the market. That is the fact the market may be overbought or may be oversold. It is an excellent strategy when the market has proven to be flat as well as range bound.
Relative Strength Index (RSI) = 100 – 100 / (1 + RS)
Where RS = Average gain of up periods during the specified time frame / Average loss of down periods during the specified time frame/
RSI values range from 0 to 100. The default time frame for comparing the RSI is 14 trading days. A RSI value of 70+ indicate that the stock is becoming overbought or overvalued, and therefore a trend reversal or corrective downtrend can happen in the stock.
If RSI of the stock is below 30 ie. 30- can be interpreted as that the RSI is indicating that stock is in the oversold or undervalued condition, which is a signals of a trend reversal in the stock ie. stock is likely to move up and can be brought at current levels for swing trading.
Also Read: What is super trend in technical analysis?
Swing traders are advised to carefully study the above article before they start trading in live Nse market. We also advised traders to trade as per their risk capability.
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