Best Forex Swing Trading Signals

Forex swing trading is a widely-used strategy that involves holding positions for a few days or weeks, aiming to profit from anticipated price movements. However, finding the ideal entry and exit points can be a struggle. Many forex traders rely on forex swing trading signals – indicators or alerts that tell them when to buy or sell a currency pair. 

This article will explain forex swing trading signals, how they work and how to use them effectively. 

Get Started

Earn cash back on your FX trades

Open an account in as little as 5 minutes. Spot opportunities, trade and manage your positions from a full suite of mobile and tablet apps.

Get Started

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Show More

What is Swing Trading?

Swing trading is a forex trading approach that involves holding a currency pair for one or more days to profit from market swings. Swing traders chiefly use technical analysis to identify trading opportunities but may also turn to fundamental analysis to improve their decision-making. Swing trading differs from day trading, which involves closing all positions before the end of the trading session, and trend trading, which involves holding positions for longer periods to follow market direction.

Swing High

A swing high is a point where the price of an asset reaches a peak in a specific area, indicating a potential resistance level or reversal point. To swing high, you buy when the price is low and sell it when it reaches a swing high. Alternatively, you can enter a short position when the price is high and exit it when it reaches a swing low. The aim is to capture the price movement between the swing points.

Swing Low

A swing low is where the price reaches a local minimum, which could indicate a support level or a turning point. To swing low means to do the opposite of swinging high – to sell an asset when the price is high and buy it when the price reaches a swing low. You can also enter a long position when the price is low and exit when it hits a swing high. 

Importance of Understanding Swing Trading Signals in the Forex Market

Swing trading signals offer indications to help traders profit from short-term trends in the market by revealing the direction, strength and potential reversal of trends between highs and lows. Understanding these indicators can help traders identify the best entry and exit points for forex swing trades and manage their risk and reward ratio. By combining indicators that complement each other, swing traders can increase their chances of catching profitable swings without falling prey to market fluctuations.

Trend Indicators

Trend indicators show the market trends' direction and strength. Swing traders use them to identify the dominant trend and trade accordingly. These indicators also help traders recognize trend reversals or corrections, which can provide opportunities to enter or exit trades. Trend indicators smooth out price volatility to highlight the primary trend and the most popular trend indicators are moving averages.

Momentum Indicators

Momentum indicators measure the speed and strength of price movements. They are useful for swing traders who want to understand how strong a trend is and find potential points where the trend might reverse or continue. These indicators can also help traders determine whether a security is overbought or oversold, which can signal a likely change in direction for the price. Commonly used momentum indicators include Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI) and Stochastic Oscillator.

Volume Indicators

Volume indicators are tools used in technical analysis to display the amount of trading activity in a market. They help confirm the authenticity of price movements and determine the level of interest or involvement in a market. Volume indicators also make it possible to detect divergences between price and volume, suggesting a weakening or strengthening of the trend. Commonly used volume indicators include On-Balance-Volume (OBV), Chaikin Money Flow (CMF) and Ease of Movement (EMV).

7 Best Indicators for Swing Trading

Many indicators can be used for swing trading, but some of the most popular and effective ones follow.

Moving Averages (MA)

These are trend indicators that show the average price of a market over a certain period. They help swing traders identify the trend's direction and strength, as well as likely entry and exit points. Common moving averages used in swing trading include the 20-day, 50-day and 200-day moving averages.

Moving Average Convergence Divergence (MACD)

This momentum indicator shows the relationship between two moving averages of the price. It helps swing traders gauge the momentum and direction of the trend, as well as spot potential trend reversals or continuations. The MACD consists of a MACD line, a signal line and a histogram.

Relative Strength Index (RSI) Signals

This RSI measures the speed and magnitude of price changes. Swing traders use it to determine overbought or oversold conditions, indicating a possible change in price direction or a continuation of the trend. RSI values range from 0 to 100, with levels above 70 indicating overbought and below 30 indicating oversold.

Bollinger Bands

These volatility indicators show the range of price movements around a moving average. They help swing traders identify high or low volatility periods, which can signal a potential breakout or breakdown. Bollinger Bands consist of a middle band (a moving average), an upper band (a standard deviation above the middle band) and a lower band (a standard deviation below the middle band).

Volume 

This indicator shows the amount of trading activity in a market. It helps swing traders confirm the validity and strength of the price movements and identify divergences between price and volume, which can indicate a weakening or strengthening of the trend. The chart displays volume as bars, histograms or lines.

Stochastic Oscillator

This momentum indicator compares the closing price of a market to its price range over a certain period. It helps swing traders identify overbought or oversold conditions, as well as potential trend reversals or continuations. The Stochastic Oscillator consists of two lines: %K and %D, oscillating between 0 and 100, with levels above 80 indicating overbought and below 20 signaling oversold.

Bullish and Bearish Chart Patterns

These are graphical representations of the price movements that form recognizable shapes on the chart. They help swing traders anticipate future price movements based on the completion or continuation of the patterns. Common chart patterns in swing trading are head and shoulders, double tops and bottoms, triangles, flags, pennants, wedges and channels.

Choosing the Best Indicators for Swing Trading Forex

Swing trading forex involves using indicators to identify trends and make trades within those trends. However, there is no single indicator that works for everyone and traders should experiment with different indicators and combinations to find what works best for their style, goals and risk tolerance. It's also important to use other tools, such as trend lines, support and resistance levels, candlestick patterns and price action, to confirm trade signals generated by indicators. Using these methods can boost your chances of success in swing trading forex.

Frequently Asked Questions