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Are you looking for the best swing trading indicators? Indicators make up a large portion of how traders analyze and trade financial markets. They have been around for almost as long as there were financial markets available to be traded. The growth in online trading and wide spread use of computers has lead to an explosion of the different kinds and types of indicators a trader has available today. There are a wide variety of indicators that swing traders can implement into their trading. However, there are only a few indicators that the top banks and market traders use in their trading. These are moving averages and momentum based indicators.
Some of the earliest kinds of indicators were moving average indicators. Moving averages are widely used by banks and other corporate players. While there are many different kinds of moving averages available, surprisingly the main players still use simple moving averages. The most popular simple moving average is the 150 day and 200 day. Why is this time frame so popular? The 150 and 200 day simple moving average are often used to show the main trend. With price above, the trend is up, with price below, the trend is down. While this may sound simple, many institutions still use this basic rule of thumb when they are analyzing markets. A 200 day simple moving average allows you to see at a glance exactly where price is and what stage the market is in. Up trend or down trend. With the market in an up trend, traders are looking only to buy or go long when their trading system generates a signal. With price below the moving average, the market is in a down trend and traders are looking to only sell or short the market. You may be surprised at just how many and the kinds of institutions that implement this basic method of trend identification using simple moving averages and just how effective they are.
Momentum based indicators are also a popular amongst professional traders. The two most popular momentum based indicators are Relative Strength Index (RSI) and Stochastics. These indicators measure the momentum or speed of the change of price in the market and in addition can show areas where price may potentially be overbought or oversold. Momentum precedes a change in price, and this is exactly why momentum indicators are popular. When momentum drops, but price continues down, traders may start to tighten their stoplosses as they know a pullback in price may be coming. A drop in momentum is an early warning sign that the market may be about to change direction. Similarly, overbought and oversold areas of these two indicators are meant to warn of times when the market is exhausted and may be at a turning point.
While the above swing trading indicators are by no means complex, this doesn't stop the largest banks and deepest pockets in the world from using them to trade. Professional traders use these indicators to swing trade successfully and manage to earn billions each year from the stock and forex markets.
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