Swings are extremely important and belong to technical analysis since the beginning of time and all of you, who did the technical analysis before, surely noticed them. Swings are a foundational tool which nevertheless should be known also by the more experienced traders. But what are swings? And how can we use them for trading?
What is a swing
Swing cannot be easily defined using only one word. Swings are price movements – curves or waves made when the short-term trend reverses. When the swings are raising and each swing is above the previous one, we can talk about a rising trend. And vice versa. Swings can be found on all timeframes from M1 up to monthly.
On the picture on the right, I have marked the curves I am talking about. It is a system through which price of all assets from stocks to currency pairs to indexes change. Swings were and always will be here. There will always be someone, who will sell or buy assets and exactly these people make swings possible.
However, to be exact, when talking about swings, we are talking only about the top and bottom curves, not the whole wave. See the following picture.
What are swings good for
Swings are, as I’ve mentioned earlier, a foundational method used to determine a trend. If they rise, ie. swing low and swing high alternate and end always on a higher price, we can say that price is in an uptrend (rising trend).
For downtrend (declining bearish trend) it is the same, just the opposite, curves must fall down. If swings do not clearly rise or fall, we can talk about intermediate stage between trends – stagnation. And therefore, also about (ie. after double peak) trend reversal, or (after a rebound from strong support) about trend continuation.
On the picture above you can see a rising trend – swings rise. When they stop rising and stagnate, trend reversal and decline follows.
I hope I presented the topic clearly. Swings are a simple method to determine trend using rising and falling local maximums and minimums. 🙂 I wish you good luck in determining the trend!