Financial Literacy

Swing Trading Indicators That Investors Live By

Swing trading indicators are critical in helping investors make better stock decisions. However, what are the most popular indicators? And how do swing traders analyze data when mulling over investment opportunities?

Most popular swing trading indicators

Most Popular Swing Trading Indicators

Swing trading is growing in popularity among investors of all experience levels. In addition, there are many popular strategies in play today.

The goal is to profit on price swings by holding on to stock positions for one or more days. And it’s often compared to day trading. But swing traders will hold on to a stock for several weeks on occasion.

So how do swing traders capture gains over a short period of time? They analyze patterns and charts to determine what they believe to be the best time to buy or sell a stock.

For example, the most popular swing trading indicators include:

  • Moving average crossovers
  • Cup-and-handle patterns
  • Head and shoulders patterns
  • Flags and triangles
  • Key reversal candlestick patterns.

Each of these indicators can play a major role in the decision-making process of a swing trader. And while each is different, their purpose is the same across the board. These traders are trying to recognize patterns that may indicate potential price movements in a stock.

Moving Average Crossovers

Moving averages are widely used by swing traders. This is because they’re easy to understand and they can identify or confirm potential trends.

This is the process of calculating lines based on past closing prices. You start by averaging out all the closing prices from a given period of time. After adding all this up, you divide the closing prices by the number of days you are analyzing. This final value is known as equal-weighted value.

Most swing trading indicators require some degree of advanced mathematics or analysis. Moving averages are no different. And swing traders often use equal weighting to identify the strength of a trend and the likelihood of a reversal.

Cup-and-Handle Patterns

The cup-and-handle pattern is a bullish indicator that swing traders can recognize on stock charts. The cup is in the shape of a “U” and the handle shifts downward slightly.

This is one of the most common swing trading indicators that recognize downward trends in stocks. And this indicates that there is selling pressure on the specific stock.

Head and Shoulders Patterns

Head and shoulders patterns are also recognized on stock charts. However, these patterns have three distinctive peaks that create a baseline to work from.

The main purpose of this indicator is to predict trend reversals. In most cases, these reversals are bull-to-bear.

Flags and Triangles

Flags and triangles are chart patterns that can depict the lines of a trend at its converging price range. In simpler terms, the chart shows the connection between stock highs and lows that form a trendline.

These chart patterns can tell you a lot about a stock. And this depends on the type of triangle: ascending, descending or symmetrical.

Ascending triangles indicate more buying. Descending triangles indicate price collapses. And symmetrical triangles indicate holding patterns and possible breakouts.

Key Reversal Candlestick Patterns

Key reversal candlestick patterns do not occur very often. However, they can be reliable when they do. These swing trading indicators have been used to predict price direction for quite some time.

When the stock is trending upward, the candle will show that stock prices hit a new high and then closed near the previous day’s lows. When trending downward, the stock price will hit a new low before closing near the previous day’s high. The higher the price range and the bigger the volume, the more reliable the signal will be.

Swing Trading Indicators That Work

Breaking down charts and analyzing data is foundational to all walks of investing. And swing trading is no exception. You can make or break your portfolio depending on your ability to recognize and analyze patterns correctly. There’s plenty of personal swing trading stories that can give you an even broader perspective.

To further expand your investment knowledge, sign up for the Trade of the Day e-letter below. Investment U has a dedicated team of Wall Street experts with decades of experience recognizing trends and providing stock market tips.

You can become a better investor each and every day. These swing trading indicators have been a part of investing research for many years and aren’t going anywhere.


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