7 best swing trading indicators for 2024

From constantly tracking the charts for price action to keeping an eye on indicators for a momentum shift, the act of actively scalping trades and day trading can be too challenging for many crypto traders. Fortunately, day trading isn't the only way to make crypto gains over time. Enter swing trading — a trading strategy that finds that sweet spot between active day trading and passive long-term holding.

Interested in finding out the best ways to set yourself up for success with swing trading? From moving averages to bollinger bands, these are the best swing trading indicators to add to your arsenal when swing trading the crypto markets.

What is swing trading?

Swing trading crypto is a strategy that involves trading over a short period to capture short-term price movements in the market. This timeframe typically lasts from a few days to a couple of weeks and contrasts with the buy-and-hold strategy, which tends to last for several months or years. Swing trading is a popular strategy because it allows traders to take advantage of short-term price movements and catalysts. These factors can potentially offer greater returns compared to long-term holds given crypto's inherent volatility.

Best indicators for swing trading

To succeed when swing trading crypto, you need trading indicators that give you the right signals to make the most informed trading decisions amid volatility. Here are a few of the best indicators for swing trading that all crypto traders should be aware of.

1. Moving averages

Swing trading moving averages chart
Source: Trading View

Moving averages is a popular technical analysis tool swing traders use to identify potential trade opportunities. A moving average is calculated by averaging the price of an asset over a specific period of time, such as 20 days or 50 days.

Moving averages are useful for identifying trends in the market. Traders often use two moving averages to identify the overall trend: a short-term moving average, such as the 20-day moving average, and a long-term moving average, for example, the 200-day moving average. When the short-term moving average is above the long-term moving average, the asset in question is considered to be in a bullish cycle, indicating the trend will likely continue. Conversely, when the short-term moving average is below the long-term moving average, it's considered a bearish signal, indicating that the trend is likely to continue downward.

Moving averages can be used to identify potential entry and exit points. For example, a trader may enter a long position when the price of an asset crosses above the short-term moving average, indicating a potential uptrend and forming of a golden cross. Alternatively, a trader may exit a long position when the price crosses below the short-term moving average, indicating a potential downtrend and the formation of a death cross.

Moving averages are customizable, meaning traders can adjust the time periods to fit their trading style and preferences. For example, some traders may use a 50-day moving average as the long-term trend indicator, while others may use a 100-day or 200-day moving average.

2. Relative strength index (RSI)

Swing Trading RSI chart
Source: Trading View

The RSI is a momentum oscillator used for identifying overbought and oversold conditions in the market. The RSI is calculated by comparing an asset's average gains and losses over a specific time, usually 14 days.

The RSI ranges from 0 to 100. A reading above 70 indicates an asset is overbought, whereas a reading below 30 indicates an asset is oversold. When an asset is overbought, it could suggest that the asset's price has risen too far, too fast, and is likely to experience a correction. When an asset is oversold, the opposite is assumed.

Swing traders can use the RSI to identify potential entry and exit points. For example, a trader may enter a short position when the RSI is above 70, indicating that the asset is overbought and likely to experience a correction. Conversely, a trader may enter a long position when the RSI is below 30, indicating that the asset is oversold and likely to experience a rebound.

The RSI is also customizable, meaning traders can adjust the period to fit their trading style and preferences. Some traders may use shorter time periods, such as seven days, to identify short-term overbought and oversold conditions, while others may use longer time periods, such as 21 days, to identify longer-term overbought and oversold conditions.

3. Bollinger Bands

Swing trading Bollinger bands chart
Source: Trading View

Bollinger Bands are a type of volatility indicator used to identify potential breakouts or trend reversals. Bollinger Bands consist of a moving average and two standard deviations plotted above and below the moving average. The standard deviations widen when volatility increases and narrow when volatility decreases.

Bollinger Bands are great for identifying potential entry and exit points. When an asset's price moves above the upper band, it’s considered to be overbought. When the price moves below the lower band, it’s considered to be oversold. Traders may enter a short position when the price moves above the upper band, anticipating a potential correction, or enter a long position when the price moves below the lower band, anticipating a potential rebound.

Traders are able to customize their Bollinger Bands, as they are able to adjust the time period and standard deviation values to fit their trading style and preferences. Some traders may use a shorter time period, such as 10 days, to identify short-term breakouts, while others may use a longer time period, such as 20 days, to identify longer-term trends.

4. Fibonacci retracement

Fibonacci retracement
Source: Trading View

Fibonacci retracement is another popular tool used by swing traders to identify potential support and resistance levels in the market. Fibonacci Retracement is based on the Fibonacci sequence, a mathematical sequence occurring naturally.

To use Fibonacci retracement, traders first identify the high and low points of an asset's price movement. They then draw horizontal lines at the key Fibonacci levels of 23.6%, 38.2%, 50%, 61.8%, and 100%. These levels indicate potential areas of support and resistance.

Swing traders can use Fibonacci retracement to identify potential entry and exit points. For example, a trader may enter a long position when the price of an asset retraces to a key Fibonacci level, such as the 38.2% or 50% level, indicating a potential rebound from a previous downtrend. Conversely, a trader may exit a long position when the price reaches a key Fibonacci level, indicating a potential resistance level.

Yet again, Fibonacci retracements are customizable, meaning traders can adjust the levels to fit their trading style and preferences. Some traders may use additional levels, such as the 76.4% level, to identify potential support and resistance areas.

5. Moving average convergence divergence (MACD)

Swing Trading MACD chart
Source: Trading View

The MACD is a popular trend-following momentum indicator used by swing traders. It's calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA, known as the signal/indicator line, is then plotted on top of the MACD line.

Swing traders use the MACD to identify bullish or bearish crossovers. A bullish crossover occurs when you observe the MACD line cross above the signal line, indicating a potential uptrend. On the other hand, bearish crossovers occur when the MACD line crosses below the signal line, indicating a potential downtrend.

Traders can also use the MACD to identify potential entry and exit points. For example, a trader may enter a long position once the MACD crosses above the signal line, indicating a potential uptrend, or exit a long position when the MACD crosses below the signal line, which typically indicates a potential downtrend is on the horizon.

Traders can customize certain elements of the MACD, such as the time periods, to fit their trading style and preferences. Some traders may use a shorter time period, such as a 9-day EMA and 12-day EMA, to identify short-term trends, while others may use a longer time period, such as a 26-day EMA and 50-day EMA, to identify longer-term trends.

6. Ichimoku Cloud

Swing trading Ichimoku Cloud chart
Source: Trading View

Also known as Ichimoku Kinko Hyo, Ichimoku cloud is a multi-faceted technical indicator used by swing traders to identify potential trend reversals, support and resistance levels, and potential entry and exit points.

The main components of the Ichimoku Cloud are the Tenkan-sen, Kijun-sen, Chikou Span, Senkou Span A, and Senkou Span B. The Tenkan-sen is the fastest moving average on the indicator and is calculated by averaging the highest high and lowest low over the past nine periods.

The Kijun-sen is the slowest of the moving averages on the Ichimoku cloud indicator and is calculated by averaging the highest high and lowest low over the past 26 periods. Then we have the Chikou Span, which is the lagging line and is plotted 26 periods behind the current price. The Senkou Span A and Senkou Span B form the clouds and are plotted ahead of the current price based on the average of the Tenkan-sen and Kijun-sen.

7. Volume

Swing trading volume chart
Source: Trading View

Volume is a crucial component in swing trading as it provides insights into the strength of a price movement. Volume refers to the total number of shares or contracts traded during a specific time period. Higher trading volume indicates stronger buying or selling pressure, and vice versa.

Swing traders use volume to confirm trend direction and identify potential reversals. For example, when the price of an asset is rising on high trading volume, it suggests that there is strong buying pressure, indicating a potential uptrend. Conversely, when the price of an asset is falling on high trading volume, it suggests that there is strong selling pressure, indicating a potential downtrend.

Swing traders can use volume indicators alongside other technical indicators to make informed trading decisions. For example, a trader may use a moving average crossover with high volume as confirmation of a trendline reversal or use the Relative Strength Index (RSI) alongside volume to identify overbought or oversold conditions.

Final words and next steps

To be a successful swing trader, traders often use technical indicators to help them identify potential trade opportunities and manage their risk effectively. The indicators above are powerful tools for swing trading that can help traders identify potential trend changes, support and resistance levels, and potential entry and exit points.

It's important to note that no single indicator can guarantee success when swing trading crypto. Traders should use a combination of indicators to get a complete picture of market conditions and make informed trading decisions. Moreover, traders can practice disciplined risk management by setting stop-loss and take-profit orders and avoiding overleveraging.

FAQs

What's the time horizon for swing trading?

Swing trading typically involves holding positions for a few days to a few weeks, depending on market conditions and the trader's preferences. Unlike day trading, which involves buying and selling assets within the same day, swing trading allows traders to take advantage of short-term price movements without constantly monitoring the market.

What's the biggest risk in swing trading?

The biggest risk in swing trading is market volatility. Prices can be volatile and unpredictable over short periods, resulting in unexpected losses for traders. Moreover, swing traders may be exposed to overnight risk, as positions are held overnight and may be affected by news or events that occur outside of trading hours.

Which RSI indicator is best for swing trading?

The best RSI indicator for swing trading depends on the trader's preferences and trading style. Some traders may prefer a shorter time period, such as a 7-day RSI, for short-term swing trading, while others may prefer a longer time period, such as a 21-day RSI, for longer-term swing trading. It's important for traders to test different RSI indicators and time periods to find the one that works best for their trading strategy.

Which chart pattern is best for swing trading?

The best chart pattern for swing trading depends on the trader's preferences and trading style. Some popular chart patterns used in swing trading include cup and handle, double top, and head and shoulders. These patterns can be used to identify potential trend reversals or breakouts and help traders make informed trading decisions.

Is MACD good for swing trading?

Yes, MACD is a popular momentum indicator used in swing trading to identify potential trend changes and entry and exit points. Traders use MACD to identify bullish or bearish crossovers, which can signal a potential uptrend or downtrend. The MACD is customizable, meaning traders can adjust the time periods to fit their trading style and preferences.

Which EMA is best for swing trading?

The best EMA for swing trading depends on the trader's preferences and trading style. Some traders may prefer a shorter time period, such as a 20-day EMA, for short-term swing trading, while others may prefer a longer time period, such as a 50-day or 100-day EMA, for longer-term swing trading. It's important for traders to test different EMA values to find the one that works best for their trading strategy.

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