Swing high and swing low; you may possibly have heard that the definition of used often times notably one of traders. For those who were confused with exactly what this word means, then this guide will clarify. At the close of this content you could have the ability to discover swing high and swing low points.
Why it things, an individual may ask.
Well it can, because amount infrequently moves into 1 direction. Pull any graph across any store and you’ll truly find the zig zag fashion. As amount has a tendency to flipflop since it trends higher or lower, you are going to realize that the swing highs and lows forming.
As each daily trader swing high and swing low may disclose crucial store details. Whenever you comprehend just how to work with this advice, it is possible to quickly play different trading strategies. With swing high and swing you can ride the tendency to trading trade the store that’s stuck in an array.
Swing high and swing low are normal to most graphs and so, the concept can be placed on almost any store. What’s better still is that swing low and high may be implemented to some given time period. This means for you personally is that, focusing on how fold high and swing works lets you swing trade or daytime trade the stores.
Another aspect to keep in your mind is that the fractal character of the swing high and swing low points. If you take a close look in a 5-minute graph or some weekly graph time frame, then swing highs and swing highs may be identifiable.
What really is a fractal you may possibly ask?
Well, fractal means being a curve or even a geometric figure, based to the submission on Wikipedia. Each part has exactly the equal statistical personality. It’s a pattern which repeats it self. A fantastic case in point is that of a Snow Flake at which the fractal pattern does occur while you zoom .
Undoubtedly, there’s a great deal of mathematics involved and there’s really a technical field within the analysis of fractals. This informative article provides fundamental insight to fractal geometry. It’d be well worth a read since it discusses the basic principles of how fractals therefore you’ve got an improved understanding.
Below is a good example of a Sierpinksi Triangle out of This Site.
Example of fractal geometry – The Sierpinski Triangle
You can see from the above figure how the triangle pattern is repeated when you zoom in. In other words, the larger triangle is made up of multiple smaller triangles in the equal fashion.
Now that we know what a fractal is, let’s move on to explaining what a swing high and swing low is.
So let’s start with the very basics.
What is a swing high and swing low?
The text book definition for a swing high and a swing low is as follows:
A swing low is when amount makes a low and is immediately followed by two consecutive higher lows. Likewise, a swing high is when amount makes a high and is followed by two consecutive lower highs.
The before all else chart beneath shows this definition in action on the amount chart.
Example of a Swing high and swing low
What you see in the chart is a 5-minute chart for APPL. The flags at the top and the bottom show the swing high and swing low.
The flags depict the point when amount makes a swing high or a swing low. Following the high and the low, the next subsequent sessions form a two consecutive lower high or a higher low. The above is an example of a very microscopic look at the swing high and swing low.
For intraday traders, the above chart can reveal quite some information. For example, starting with the before all else flat on the left side, you can see that after the swing low is formed, amount tends to move higher. This tells you that the store is trend higher.
What’s more! The second swing low marked by the flag shows that it is a higher low compared to the before all else flag.
Now if you look close enough you will see that the swing highs identified by the fourth and sixth flag are formed almost at the equal amount level. Subsequently, amount tends to make swing highs and lows, each of which is higher than the previous one.
Capturing trends with swing high and swing low
This pattern tells you that amount is in an uptrend. However, as you might figure out, this is only in hindsight. So how can we capture the uptrend as amount tends to make higher highs and lower lows?
You simply look at the swing highs and the swing lows. Now let’s add a moving average to the chart above to obtain a better picture.
Swing high and low and the moving average to understand trends
Now the trend is clear when you look at the 10-period moving average. This is nothing but using swing high and swing low in order to understand the trend. The convenience of using the swing high and swing low is that you are able to define the trend by just looking at these patterns.
But you might be wondering why a swing high and swing low is formed in the before all else place.
Why are swing high and swing low formed?
A swing high and swing low is formed due to what is known as support and resistance. The technical explanation for support and resistance is as follows.
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A support forms for the amount when you notice that there are more buyers than sellers at a certain amount. The demand for the stock or the asset overwhelms the supply and thus pushes amount higher.
A resistance forms for amount when you notice more sellers than buyers at the amount level. In this case, amount fails to move higher and therefore declines.
In the next chart beneath, the support and resistance levels are shown which also coincides with the swing high and low.
Swing high and low identified by the support and resistance levels
When amount breaches previous swing low or high point and follows up with another swing high or a swing low, amount continues the trend. To put this in perspective, when amount breaks the resistance level and forms a swing low, it means that buyers are in control. Similarly, when amount breaks the support level and forms a swing high, it means that sellers are in control.
Now that we know the basic principles behind swing high and low, let’s look at how you can use this to improve your trading.
How to use swing high and swing low in your trading?
There are many ways to use the swing high and swing low in your day to day trading strategies. For one, the swing high and low method can be applied to identifying the trends in the store. You can also make use of the swing high and low based on the larger time frame.
In other words, instead of using the basic definition of swing high and swing low, you can identify the turning points based on a larger time scale.
The chart beneath shows a one-hour chart time frame for APPL.
Here, instead of using the swing high and low based on a session or a candlestick basis, we simply identify the swing high and swing low points on a larger time frame.
Swing high and low on a one-hour chart
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In the above example, you can see that the swing highs and lows are formed over a series of candlesticks or sessions. Using this method will help you to identify the trends and trade in the direction of the trend.
For example, the before all else four swing highs on the above chart indicate that amount action is in a downtrend. However, after the swing low is formed, you can see that subsequent swing lows tend to post higher lows.
Eventually, amount action starts to move higher and you can see that the trend changes direction. This is evident from the third swing low that forms above the previous swing high point around the 187.00 amount level.
Using the above information you can easily trade the downtrend or even the uptrend when the direction changes.
The swing high and swing low also alerts you to potential breaks of support and resistance levels. This enables you to ride the momentum in amount action.
Trend trading with swing high and swing low
As mentioned earlier, you can trade the trends with ease using the swing high and swing low method. You can apply other trend trading strategies as well using this method. Let’s take a look at the beneath example on how we can use a simple oscillator along with the swing high and swing low method.
The chart beneath you see is for MSFT, 1 hour chart. We only add the Stochastics oscillator with the default period settings of 14, 3, 3.
Trading with Swing high and Swing low
In the above chart, the usual swing high and swing low points are plotted on the chart. You can see that after amount forms a bottom, the swing highs are formed around the equal amount level.
Similarly, the lows in amount action show that amount forms a swing low near the equal area. After this bottom formation, amount action starts to move gradually higher. This is evident from the fact that the swing lows start to post higher lows.
Eventually, amount breaks the resistance level of 100.00. Just prior to this amount action, you can see another (third) swing low being formed. By this you already can see that amount is in a clear uptrend. Buying on the break above the resistance level would give you a chance to ride the uptrend.
The before all else benefit can be booked near the previous swing high of 102.58, while leaving the rest of the position open and by covering the risk.
The above method is just a simple way to trade the trend by merely using the concept of swing high and swing low and an oscillator. You can also use this method with other indicators such as Bollinger bands or making use of overbought or oversold levels.
Why use the swing high and swing low method?
The swing high and swing low method as demonstrated above shows you how to capture the small but very significant movements in amount action. The swing high and low methods can help you to identify mainly the support and resistance levels.
Using this information which can be applied to any chart and time frame, traders can easily build or improve their trading strategies.