2025.12.08 2025.12.08
Best Indicators for Swing Trading: Ultimate Guide to Technical Analysis

Artem Parshinhttps://www.litefinance.org/blog/authors/artem-parshin/

In the Forex market, success often depends on trading strategies. These strategies are usually based on technical indicators. The best indicators for swing trading can save you a lot of time analyzing price fluctuations.

Swing trading tools include technical indicators, trend lines, price levels, Fibonacci levels, trend reversal patterns, and much more. They allow you to earn on any time frame, resulting in profits of up to 20%–25% per month. This article also explains what swing trading with indicators is.

Major Takeaways

What Are Swing Trading Indicators and Why They Matter

Swing trading is a trading strategy primarily based on following or countering trends. Swing traders use lower time frames, ranging from intraday to weekly.

Traders need to confirm trends when dealing with short time frames, as the lower the time frame, the more price noise occurs, which may disrupt a trading strategy.

To confirm a signal, traders use statistical data based on an asset’s historical performance. The sources of this data are technical swing trading indicators that not only show the price at different points in time but also reveal details about future price movements.

Understanding the Basics of Technical Analysis

Technical analysis in swing trading is almost entirely based on analyzing price chart patterns. However, depending on the time interval, the significance and influence of certain elements may vary. For example, technical indicators for swing trading are more suitable for lower time frames, while on time frames of a year or more, they are not as useful, and chart patterns are a better solution.

The most popular element of technical analysis for swing trading is trend theory. As a rule, most traders build their simplest trading strategies on the principles of buying at the bottom of a trend and selling at the top. In this situation, the main goal is to find trend reversal points, when a bearish trend turns into a bullish one or vice versa. Such a theory is usually based on a system of support and resistance levels, breakouts of which give the initial signal of a trend reversal.

Types of Swing Trading Indicators: Trend, Momentum, and Volume

Day trading based on trend lines can pinpoint areas where a trend reversal may occur, but it is difficult to obtain a signal in this way. In this case, confirmation is needed. This is why technical swing trading indicators are most often used.

There are many technical or mathematical indicators. There are three main types of indicators: trend, volume, and momentum.

1. Trend indicators for swing trading indicate the presence and direction of a trend. A trend indicator will show the direction of the trend, its strength, and how close the market is to a trend reversal.

2. Momentum indicators for swing trading or oscillators show how strong the current trend is and when to open long or short positions. They are often called signal indicators because they signal when to enter the market. Moreover, some of them are based on overbought and oversold levels.

3. Volume indicators display trading activity at a specific point in time. In other words, how many participants are trading an asset. Since Forex mainly uses tick volume, most volume indicators are based on ticks. Such indicators reflect market volatility and periods of rising and falling demand.

How Indicators Help Identify Entry and Exit Points

Most basic indicators that you can find on any trading platform rely on the principle of averaging prices over a period of time. In other words, a trading indicator analyzes the price and shows how much the current market price differs from the average price over a selected period.

When the chart is above the indicator line, there is an uptrend, and when the chart is below the indicator line, there is a downtrend. When the price crosses the indicator line, a trend reversal occurs.

When the price crosses the indicator line, a signal to open a trade emerges. However, the signal depends on many factors, the main one being the indicator period. The lower the period, the earlier the signal will be received, but the more susceptible the signal will be to errors. In this situation, filtering becomes necessary. To filter out false signals, either a more accurate setting or other technical indicators with additional features, such as overbought and oversold zone indicators, are used.

Best Trend Indicators for Swing Trading

Before opening a trade, answer the following questions:

• What is the current trend?

• How strong is the trend?

• How far is the price from the likely point of trend reversal?

• How quickly can the price reach the reversal point?

Certainly, a single trading indicator can give you the answers, but it is highly unlikely that such answers will be sufficiently reliable. That is why traders often use a combination of indicators, which serve both to confirm and filter out false signals.

According to my experience, swing trading strategies that combine different types of indicators demonstrate fairly stable trading results. For example, a blend of a trend indicator, an oscillator, and a volume indicator can be employed.

Moving Averages – The Foundation of Trend Analysis

A moving average is the most popular trend indicator. As its name suggests, it averages the price over a selected period. There are several methods for calculating the average price, but the most popular are simple and exponential.

A simple moving average (SMA) adds up all the prices and divides them by the number of periods. All periods have the same weight in the calculation.

An exponential moving average (EMA) uses a similar calculation, but the main difference is that the weight of earlier periods is artificially reduced. Thus, the EMA places greater weight on the most recent periods, which is why it is considered more accurate.

If you plot both moving averages with the same period on the chart, you will see that there are areas where the lines intersect. If you compare the intersection points with the price chart, you will see that they also coincide with trend reversals. So, here is the simplest swing trading strategy:

Buy when the EMA crosses the SMA from below and sell when the EMA crosses the SMA from above.

Bollinger Bands

Bollinger Bands is another popular trend indicator, which helps traders assess market activity. The Bollinger Bands indicator is based on a simple moving average (SMA), above and below which are zones of increased and decreased price of an asset.

When configuring the indicator, traders usually select the SMA period and standard deviations of the upper and lower boundaries. We will discuss the parameter settings in more detail below, but for now, let’s take a look at the basic parameters.

In the basic version, Bollinger Bands are a volatility indicator. That is, the narrowing and widening of its boundaries reveal periods of market activity. If the distance between the lower and upper boundaries widens, volatility is high, and the trend is strong. If the distance is minimal, volatility is low.

In addition, this trading indicator can provide fairly reliable entry signals when the price moves beyond its boundaries. It is recommended to close trades when the price reaches the middle band. In general, the strategy is as follows:

Buy when two candlesticks on the chart close below the lower Bollinger Band. Sell when two candlesticks close above the upper Bollinger Band.

Parabolic Stop and Reverse Swing Trading Indicator

The Parabolic SAR indicator, which has been somewhat forgotten lately, is also worth mentioning, as it works extremely effectively in a trending market. Its principle is to construct trend-strength points that surround the price from both sides. If the points are below the price chart, the trend is upward, and if the points are above the price chart, the trend is downward.

The deviation of the points from each other is also crucial. If the points are nearly in a straight line, the trend strength is very low, so it is better to avoid opening trades. If each subsequent point is formed above or below the previous one, the trend strength is high, and trades can be opened.

When trading with this indicator, I used the Three Points Rule. This is a technique for forming trades after a brief signal filtering. I opened a buy trade when three consecutive points formed below the price chart. A sell trade was opened when three points formed above the price. Trades were closed at the first point in the opposite direction. As a result, the strategy sounds like this:

Buy when three consecutive dots appear below the price. Sell when three consecutive dots appear above the price.

Top Momentum Indicators for Swing Trading Success

Oscillators differ significantly from trend indicators. This type of indicator is designed specifically to filter price movements and generate signals for entering and exiting the market.

Another difference between momentum indicators and trend indicators lies in their location on a price chart. While trend indicators are plotted directly on the chart, oscillators are shown in a separate window, as they provide much more functionality than simply indicating trend direction.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is probably the most well-known momentum indicator. It is based on the ratio of upward and downward movements over a given period and is displayed as an oscillator. In other words, the RSI shows the ratio of the average price increase to the average price decrease over a selected period.

This indicator has several significant advantages. First of all, it is considered the most accurate when it comes to forecasting. Its calculation formula takes into account only the most recent bar, which means that the indicator line is not distorted by previous bars. Secondly, it has oversold and overbought zones, which show when the market is saturated with trades of a certain direction.

The indicator’s operating principle is also quite simple. A trader sets the boundaries of oversold and overbought zones, relative to which signals will be tracked. The upper and lower boundaries are usually set at either 70 and 30 or 80 and 20, respectively. Wider zones allow traders to make trading decisions more precisely, but in this case, the indicator provides fewer signals. Next, the indicator line’s period is set.

After all settings are made, the trader waits for the indicator line to leave one of the zones. When the price crosses the overbought line from above, a sell trade can be opened, and when the price pierces the oversold line from below, a buy trade can be considered. The trade is then closed when the price reaches the opposite zone. In general, the following rule can be applied:

Buy when the market is oversold. Sell when the market is overbought.

Moving Average Convergence/Divergence (MACD)

MACD is another famous momentum indicator. It tracks two moving averages with different periods. It relies on the convergence and divergence of these moving averages. In trading, the concept of divergence is widely used, as it provides a strong signal of a looming trend reversal. This indicator is most often used to track average convergence and divergence.

The indicator chart represents a sequence of ascending and descending bars separated by a zero threshold. The indicator also uses a signal line, a smoothed EMA with the shortest period among the three. The histogram shows the difference between the fast and slow EMAs, and when the MACD histogram crosses the signal line, it suggests a trend reversal.

After setting the parameters, a trader waits for two or more consecutive tall bars on the MACD chart to form a downward trend. If the price hits several highs on the price chart, forming an upward trend, a divergence occurs, signaling that a sell trade can be opened. The rule looks like this:

Buy when a bearish divergence has emerged on the price chart. Sell when a bullish divergence has appeared.

Stochastic Oscillator

The stochastic oscillator deserves special attention among the best momentum indicators. It is somewhat similar to the RSI, and its basic principle is to display the position of the current price relative to the previous price ranges.

Just like the RSI, the stochastic oscillator has a range that is most often limited to 80 and 20, notching the boundaries of the overbought and oversold zones. The oscillator indicator is represented by two lines, %K and %D, superimposed on each other, with %K fast and %D slow.

Traders monitor the intersection of these lines, and if both lines are in oversold or overbought zones, they generate signals. The trading rule for the stochastic oscillator is as follows:

Buy when both lines exit the oversold zone, crossing each other. Sell when both lines exit the overbought zone and intersect.

Essential Volume Indicators for Market Confirmation

Volume indicators stand out as another group of indicators that are primarily informative and rarely used for executing trades. Moreover, swing trading volume indicators in the Forex market have become popular relatively recently, simply because currency traders have always been more focused on entry signals, which volume indicators do not provide.

Despite its low popularity, tick volume, which is used in most such indicators, is a powerful tool for assessing trading volatility and identifying potential resistance and support levels.

On-Balance Volume (OBV)

One of the most common volume indicators is OBV, or on-balance volume. Its creator believed that before every price movement, there is an accumulation of trading volume. In other words, trading volume is the primary driver of significant price movements. When trading volume declines while the market price continues to surge, it is assumed that the existing trend will likely fade soon.

The indicator uses the OBV line, which sets a value at the end of each period. It adds volume on up days and subtracts it on down days, helping traders confirm trends or spot divergences. The trading rule for this indicator can be stated as follows:

If the price is falling on the chart, and the OBV indicator shows an upward trend, a bullish trend reversal can be expected. If the price is rising while the indicator is declining, a trend reversal to the downside is likely.

Volumes Indicator

Another volume indicator is a customized version of the Volumes indicator. It works by marking tick volume growth with a green bar and decline with a red bar. Volume is assessed against the previous bar, and a red bar cannot exceed the previous green bar.

When using this indicator, it is important to understand that it is purely informative, displaying only market volatility. It uses tick volume, which shows trading activity over a selected period.

In the market, trading volume increases at the beginning and during the active phase of a trend. However, when volume begins to decline, but the trend continues, the trend deceleration phase occurs. As a rule, it is followed by a reversal and a subsequent trend change, which is accompanied by a surge in trading volume.

How to Use Swing Trading Indicators Effectively

Before you start using indicators for swing trading, you need to decide exactly for what purpose you need them. Each indicator has its pros and cons, and to make it truly helpful, you need to select the indicator that aligns with your strategy and configure it correctly.

If your strategy is focused on finding entry points, you may want to consider momentum indicators such as the Relative Strength Index (RSI) or the Moving Average Convergence Divergence (MACD). If your strategy is based on trend confirmation, indicators such as the Exponential Moving Average (EMA) or the Simple Moving Average (SMA) would be a perfect choice.

When trading with an indicator, it all boils down to a few sequential steps: selecting an indicator, analyzing entry points, determining exit levels, filtering out false signals, and locking in profits. I suggest looking at an example using entry and exit points with the Alligator indicator, which relies on three EMAs and encompasses all of the above points.

Creating a Systematic Entry Signal Process

Depending on the indicator type, entry and exit levels can be either concrete points or outlined zones. 

One of the simplest yet most effective swing strategies relies on three moving averages, of which the blue one is slow, and the red and green ones are faster. The method involves waiting for the moment when the two faster EMAs intersect the slow one from above or below.

When tuning the Alligator indicator, select periods for all three MAs so that the rule of one slow and two faster MAs is maintained. The slow moving average is the one with the longer period, and the fast one is the one with the shorter period. You also need to select the type of moving average. Although most traders use the basic exponential method, I recommend choosing the smoothed averaging method. As a result, we will use three SMMAs.

Since the indicator was originally designed for time frames from H4 and above, the moving average periods can be kept at their default values: 13, 8, and 5. The next step is to set the lines’ offset relative to the price chart to align with potential future price action, not lag behind. They can be set to the basic ones: 8, 5, and 3.

The optimal entry point for this strategy is when the two faster SMMAs cross the slow one above or below. Sell positions on the chart are marked as Sell 1 and Sell 3, while the buy position is marked as Buy 2.

Developing Profitable Exit Strategies

After entering a trade using the moving average crossover rule, you need to monitor it and wait for one of the following conditions to be met:

1. Two fast SMMAs intersect. The fast green line should cross the red line either above or below.

2. Two fast SMMAs cross the slow one from below or above.

Both conditions for closing a position are suitable for this strategy, and the only difference lies in the amount of profit you get. The first condition comes earlier, and you either miss out on some profit from the trade or close at the optimal point. In the second case, you will most likely lock in the maximum possible profit, or exit too late when the price retreats, taking less profit.

Avoiding False Signals and Market Noise

Like any mathematical indicator, the Alligator is sensitive to market changes, and when the market is highly volatile, the strategy might be less effective. To filter out false signals and minimize the impact of market noise, you can use two methods that work for almost any indicator:

1. Increase the period for all three moving averages.

2. Choose a more suitable method for calculating moving averages.

The first method requires increasing the period of each moving average. You can add 2–3 periods for each in equal proportions, or you can follow the advice of professionals and choose the period based on the Fibonacci levels.

The fact is that the Fibonacci sequence rule is often used in mathematical market analysis. This rule states that each subsequent number in the sequence equals the sum of the two previous numbers. The sequence looks like this: 1, 2, 3, 5, 8, 13, 21, 34, 55, etc. You may have noticed that I chose periods from this number sequence to configure all the indicators in this article. The basic parameters for the Alligator indicator, suggested by its creator — 13, 8, 5 — are also taken from the Fibonacci sequence.

When configuring the indicator, you can also select the MA type: simple, exponential, smoothed, or linearly weighted. Three of these methods make the setting more sensitive, which is not very suitable in this particular setting. However, the smoothed method fits perfectly. By applying this parameter, we obtain all three SMMAs, and their reactions to price fluctuations will be less sharp, which will help filter out excessive fluctuations and market noise.

Risk Management with Swing Trading Indicators

The indicator strategy requires traders to monitor positions and close them immediately when market conditions change. This can be considered its biggest drawback. However, even in this environment, it is possible to make a profit. In my opinion, the best option would be to use the flat risk method.

The flat risk method is a risk management concept that assumes that you risk a fixed amount of your capital on every trade or group of trades.

For example, with a $20,000 deposit and a conservative risk ratio of 2%, the maximum loss per trade is limited to $400. This means that when this loss amount is reached, the trade is closed manually or using a stop-loss order.

Position Sizing Based on ATR and Volatility

Volatility is one of the most important factors to consider when deciding whether to enter the market. If volatility is extremely high, market noise will also be higher, as will the chance that trades will be liquidated. If volatility is low, the time spent in a trade may increase substantially, leading to additional swap costs. In this regard, the ATR indicator is an effective method for calculating volatility.

It calculates and displays volatility in points or currency units at a given moment. If the indicator line is high, volatility is very high, and when the line is low, trading volatility is low.

To estimate the optimal position size, first enter the number of periods for which you want to hold your trade. Then, determine the stop-loss and take-profit levels based on the obtained value. For example, if the indicator shows 500 points, you can expect to make a profit within these limits for the selected period.

Stop-Loss Placement Using Technical Levels

Traders often place take-profit and stop-loss orders at the nearest support and resistance levels. This method assumes that, in addition to technical indicators, you also have trend levels on the chart. The principle for placing these levels can range from aligning trend extremes to assessing trading volume using volatility indicators, to CFTC exchange positions.

With this method, stop-loss orders are set beyond the nearest support or resistance line. Take-profit orders are placed before resistance or support levels.

The method of order placement is linked to volatility: as a rule, a stop-loss order is placed at ⅓ of the daily volatility, and a take-profit order is placed at ⅓ of the daily volatility above the level.

Conclusion

Summing up the above, swing trading is a fairly popular strategy among traders with limited capital. Beginners often choose accessible trading methods that do not require advanced skills. The best indicators for swing trading are built into almost any trading platform. However, the pursuit of easy and quick profits often leads to losses. When trading on the exchange, it is important to understand that any indicator is a complex mathematical tool, and before you start trading, it is better to test your system on a demo account or with small positions.

Swing trading with indicators is a relatively lucrative strategy, but it requires careful attention and time. Despite its drawbacks, a well-designed indicator strategy allows you to identify market entry points with maximum accuracy and generate stable profits at any time and in any market.