Best Indicators for Swing Trading: The best indicators for swing trading: Combine these 3 UNIQUE indicators for a powerful trade setup to get an edge over others.
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Best Indicators for Swing Trading
Welcome to this tutorial on some of the best technical indicators for swing trading. I want to share with you a really powerful indicator that is not that well known, but, sometimes, that’s the best stuff. You need an edge in trading and using something that others don’t use can definitely give you an edge. The indicator I want to share with you today is the double stochastic, and there’s the settings: 10 and 3. Now, I am using stock fetcher here, that’s the charting platform that you have in front of you, and my previous videos; we’ve had two or three videos using stock fetcher so I figured we’ll use it one more time here. And they do have the double stochastic built in. Now, some charting platforms do, some don’t depending on which charting platform you use.
It may or may not, therefore, ask your charting platform provider if they do offer it or not. I don’t have this to send to you, it’s just something that either your charting software has or doesn’t. Another option you can do is, a lot of times, user forums for various software will have indicators you can download. Anyway, just wanted to address that because whenever I talk about an indicator like this that’s not very common, I always get people emailing me saying “Hey, can you send that indicator to me?”. Well, this is not something I could send to you, it’s got to be programmed for your charting platform and, hopefully, it’s built in.
Best technical indicators for day trading
So it is a type of stochastic, I’m not gonna go into the mathematics of it that’s not our point here today, but you can see; by the way, I’m also using it in conjunction with a 14-period CCI, and we’re using a daily chart. So this is a daily chart, you can see the stock that we’re using here although I will say that this could also be used for Futures, Forex as well, this is not specific to the stock market. I wouldn’t recommend trading this or frankly anything unless you confirm it with a higher time frame using multiple timeframes. Now, having said that, what are we looking for? First of all, I’m looking for my moving averages to line up and this helps me to determine trend.
The primary moving average that I use for Trend is the 50-period simple moving average, so you can see the four moving averages there and that is the 50-period simple moving average. So I want to trade this in the direction of the trend. We’re going to use this as an oscillator and here is the pattern that I’m looking for. Here we have it, by the way, yes, we have upper and horizontal lines here, those are set at 20 and 80. So this level is, let’s see, mark over here 20 and then the one up here is at 80. So we’re looking forward to come back above and when it does, then that is a potential a buy signal. Now, I wouldn’t short this here. Here, of course, it gets below 80 – will I short that? No, why?
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Because I want to trade this in the long-term direction of the market and right now the long-term direction of the market is up based on the 50 period simple moving average. So that’s the first thing I want to say – an oscillator measures short-term moves, and we need to trade it in conjunction with a long term indication. So the long term indication is the meta pattern – that is the direction we’re going to trade in. Then, we use the short-term oscillator, such as this one, to catch entries or to trigger us into entries but only in the direction of the long term move. That’s really important. That’s where we’re going to get our reward to risk ratio. For example, if you took this signal short here, well, I mean that, I guess, is kind of a high but not a good reward to risk ratio, right?
It comes only down that far then this comes down back below 20, it goes back above 20 and it’s not a good trade. On the other hand, this is a great trade, it explodes up. That’s what you want and, by the way, notice too that after it explodes up, it doesn’t get back down to below 20 until way over here. Here, it gets below 80 but then it stays around the middle of the range. Doesn’t get down below until over here. Most people will call 80/20 overbought-oversold, I hate those terms, I don’t think they’re accurate. But, this really indicates that, again, the point is, we’re trading just using, again, putting these two tools together – a long-term directional indicator whether you want to use the 50 period simple moving average or if you have another one you like, that’s great.
Best technical indicators for stock trading
But that’s the first step, always use a long-term indicator to determine which direction you want to trade because a trend, by the way, is the extended general direction. So trend is never a short-term move. By definition, Webster’s dictionary, it is an extended direction of the market and that’s not just to be a stickler of the English language, it’s important in trading because we want to trade in the long term direction because we want a good reward to risk ratio. The longer the direction, the better reward we get and there’s a financial reason for that obviously, all right? So that’s why we only use the oscillators in the direction of long term move. Now, if you look over here, the next signal after it pops back above; it goes back down below 20, pops back above 20, would be here.
And does it go up from there? Yes, it does. It comes down a little bit below the 50 ma but the 50 ma is still angling up, it does go off their screen here but it actually did continue to make higher highs after this. Now, I never would trade any one indicator by itself, again, basic three steps (I would probably use more than this and my personal methodology, I use five) but here are the basic three steps. Number one, trade in the long-term direction of the market, and I will also add another Part One B to that – when we’re trading in the direction of the trend, we want to trade early in a new trend. That’s very important because the famous slogan, the trend is your friend until the end, so we don’t want to trade at the end that’s when it’s our enemy.
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It’s not just in the direction of the long term move, it’s early. Early in a new trend, number two. Once we get that established, then we use an oscillator such as the double stochastic here which is a nice one, and we’re using that to trigger us in the direction of that long-term trend, only trading in that direction. And number three, don’t forget, use multiple timeframes – really important. Using multiple timeframes helps you to stay out of otherwise really good-looking setups – if you had the experience where you trade some setups that look really great and they don’t work out, if that happens, once in a while, that’s not a problem. But if it happens consistently, you got a big problem. One way to help avoid that is to filter those otherwise good looking trade setups, with the longer term chart.
Real quick, I’ll just give you a little piece of advice there, I am NOT a believer in trading in the direction of trend of the long term timeframe. I think that’s just a disasterous approach. It is classic, it is the Orthodox approach and it makes no logical sense, whatsoever. I have another video on that by the way if you’re interested. So we trade in the direction of momentum of the longer term timeframe, and the basic reason is trend is always a lagging indicator and if you’re using it on a longer-term chart, then double slow and that’s just always going to be slow to the party to confirm your trades. It becomes pretty much useless. Trading momentum, on the other hand, if we are trading, for example, if we’re trading this long, what we want is momentum on the longer term time frame.
Swing Trading Indicators
Momentum is strength, we want power on that long term move. And, by the way, I didn’t mention it but the CCI here, notice that it is kicking up here as well, right? It’s making a higher high at this same time and CCI as a momentum indicator. That shows we got momentum on the short term and then if we look at our long term trend, you can use CCI as your long term indicator as well if you want to, then we have – actually, I’ve got it here, I should show you this. Yes we can. I actually have the weekly CCI on the same chart, this is one of the cool things about Stock Fetcher, you can do that. So if you look at this, that’s exactly what we’ve got – we’ve got CCI as our long-term momentum indicator moving up as well. And that’s the perfect scenario.
Yes, we love that. So those are three simple steps and if you want to add a short term momentum as well as your long term momentum, I think that’s actually a great way to go. That way you have strength on both the short term and the long term. So think of that, if you got major strength than your short term chart, that’s bullish; a major strength on the long term chart, that’s bullish. Odds are that markets gonna move up – that’s what we want, strength, the strong buying power.
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So if you liked this video, if you found it helpful, then feel free to leave a nice comment just to encourage me to continue to create these free tutorials for you. Give it a thumbs up! The best thing you can do really that I love would be to share it with others and I don’t get any financial benefit from that but it does help other people and, you know, paying it forward is the ultimate compliment. If you can share it with others and you feel good about that, I would really appreciate that. In addition to that, I do have another gift I want to give you and that is actually a little mini course I put together, and this little mini course I’ll give you absolutely free. In that course, I actually give you a complete trade methodology.
It’s called the Rubber Band Trade. And, similar to this, but a little more sophisticated, I go through the whole trade setup, step-by-step, and I show you exactly where to get in exactly, where to place your stops exactly, what our exits. It’s a little longer video obviously, it’s about three times as long as one of these short 10-minute YouTube videos but that gives me the time to give you the entire trade methodology. Like I said, it’s called the Rubber Band Trade. Go ahead and click the little image in the top right hand corner of this video or description below, there’s also a link and I’ll be happy to go ahead and as soon as I receive your request, send you a video of that trade absolutely free – my gift to you.
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BTW, if you’re interested in the indicator that I use personally for very precise entries and exits, I’m happy to share that with you. Just send me an email at support@topdogtrading.com, and I’ll show you how to get access to that indicator.
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