Swing Trading's 11 Commandments: Top Strategies for Technical Analysis
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Swing traders specialize in using technical analysis to take advantage of short-term price moves. Successfully trading these swings requires the ability to accurately determine both trend direction and trend strength. This can be done through the use of chart patterns, oscillatorsfractalsvolume analysis and a variety of other methods. This article will focus on using oscillators and candlestick patterns as a quick and easy way to characterize a trend and successfully identify swing trades.
Finding Potential The first step is to find the right best oscillator for swing trading for a reversalwhich can be done with either candlesticks or oscillators. Candlestick reversal indicators are characterized by best oscillator for swing trading candles, while oscillator reversal indicators are characterized by divergence and convergence.
Let's take a more in-depth look into these methods:. Indecision Candles Candlestick charts are designed to enable traders to quickly and accurately interpret a stock's price movements.
As we best oscillator for swing trading, the body of the candle indicates the open and close, while the tails on either end represent the day's price movements. We also know that we can characterize indecision as "volatility without movement" - or long tails with a short body.
Typically, indecision candles are seen as a time when the trend is about to change. Convergence and Divergence Convergence and divergence are simply times when a stock's price movement differs from momentum indicators.
Think of it in physics terms - if you throw a ball up in the air, it loses momentum before it reverses direction. The same is true for stock prices: Convergence and divergence can show you when the momentum is slowing and a potential reversal is forthcoming. Pinpointing a Reversal The next step is to define an exact or as close a possible point of reversal.
This task is best accomplished using specific candlestick patterns. Although there are well over 60 different candlestick patterns, there are only a select few that give consistent points of reversal. When properly identified, these candlestick patterns are among the most reliable. The key is in the length of the candlesticks.
Ideally, the first candle should be short on low volume and the second one should be long on high volume. This indicates indecision in the last portion of a trend and then a decisive reversal in a different direction. Harami Cross The Harami cross pattern is another very common candlestick reversal pattern. The key to successfully reading this pattern is watching the volume. Here we are looking for strong volume on the trend leading up to the cross, and then low volume and very short tails on the Harami cross candle.
This indicates a strong and sudden lack of confidence by traders in the prevailing trend, which is often followed by a reversal. Some Examples Let's look at an example of each of these types to see how they can be applied to actual trading situations. Here is a chart of Google GOOGin which best oscillator for swing trading can see examples of indecision as well as a bearish engulfing. Notice that the indecision candles predicted a large reversal, while the bearish engulfing pinpointed an exact top.
Although they may not always be this accurate, they best oscillator for swing trading generally give a good indication of a pending reversal. This reversal could be further confirmed by looking for reversal candlestick patterns during the time in which the stock was range-bound. Conclusion In general, candlesticks and oscillators provide traders with a quick and easy way to identify swing trades. Other methodologies like chart patterns, volume analysis and fractals can help build on the techniques seen here to increase accuracy and profits.
Let's take a best oscillator for swing trading in-depth look into these methods: Bearish engulfing Harami Cross The Harami cross pattern is another very common candlestick reversal pattern.
Bearish harami cross Some Examples Let's look at an example of each of these types to see how they can be applied to actual trading situations.