This video will show you the best swing trading indicators and how you can use
them to trade for a consistent income. If you like this video make sure to leave it a like
and make sure to subscribe for more stock market tutorials.
First up is one of the best indicators for swing trading and that is the MACD. So this
is a trend indicator meaning that it tells you when a reversal is about to happen in a stock.
Whether that be it's going to break to the upside or it might be breaking to the downside. When you
first add the macd to your chart it will look like this. Now it's important not to change
these settings unless you have a specific reason to. We know a lot of swing trading and day trading
is about self-fulfilling prophecies. What i mean by that is that oftentimes a lot of swing traders
or day traders will recognize the same pattern at the same time and then they will use that
pattern to enter the trade. When enough traders do this all simultaneously they actually create
enough buying pressure which pushes up the stock creating a self-fulfilling feedback loop. So,
you always want to use the default settings of 12, 26 and 9 because the whole point of
using these indicators is that you're seeing what everyone else is seeing. Now let's dive a little
bit deeper into what the macd actually is. The macd is calculated by subtracting the 26 ema from
the 12 ema and creating a constantly updated line which looks similar to a moving average.
A 9-day ema of the macd line is then added as well which is meant to be used to show buy or sell
signals the most common way to use macd as a swing trading indicator is to look for divergences or a
crossover of the center line of the histogram. At least in theory when the macd crosses above
zero it's showing buying opportunities when it crosses below zero it's showing selling
or shorting opportunities essentially if you are looking for a simple swing trading strategy for
beginners you can wait till the red bars cross over and become green bars in order to enter
and buy a trade when this happens it does show you that the stock has a lot of strength and momentum
so macd can be considered one of the best swing trading indicators but you have to
actually understand how to use it and what it's telling you i see a lot of people using it in an
oversimplified manner obviously if it was so simple as i just described it where you just
buy a stock every time it crosses from red to green then we'd all be billionaire traders by
now right and obviously that's not the case so what macd is actually telling you from a more
advanced perspective is it's actually showing you the change in momentum of a stock if macd shows us
the difference between a 12 period moving average and a 26 period moving average then any time it's
greater than zero it's just telling you that the more recent price action the 12-day price action
is stronger than the 26 day price action before it so simply put it shows you that the stock
is gaining momentum right the more recent price action is stronger than it has been in the past
that's really what it's showing you now if the actual green bars continue to grow and are getting
larger and larger it's showing you that the stock is getting even stronger and the momentum
is increasing for swing trading we're all about catching momentum so that's why this is really one
of the best swing trading indicators i use pretty regularly the next swing trading indicator we're
going to go over is vwap now this is typically used for day trading but i still use it regularly
to swing trade as well the volume weighted average price or more commonly known as vwap is a trading
indicator that is calculated by taking the number of shares bought times the share price and then
dividing by total shares bought so here's a little picture of how it's calculated basically it shows
the average price of a stock based on the volume that was traded at one specific price it's usually
calculated within a one day time frame and it displays on your chart and looks similar to a
moving average although it's a much slower and more lagging indicator than say the 8 ema or 20
day ema a simple swing trading strategy that some traders use is just simply to buy the stock if it
closes the day above the v-bop and sell the stock or short it if it closes the day below the vwap
a day trading strategy that some traders use is to let the market make a move up for the first
couple of candles and then wait for a pullback to the v-wap to either get long with the trend
or to short the trend if it's moving downwards now as a swing trading indicator it's important to
understand that vwap will often act as a support or resistance line if it's acting as a support
line this means that a stock will often fall down to the vwap hit the view up and then bounce
off of it and reverse back up finding support at that line on the other hand if a stock has been
trending up it will sometimes reach towards the vwap but then be unable to break it reverse back
and start falling down in terms of swing trading strategies i use view op as an indicator to tell
me is this specific stock overall stronger or weaker than the market as a whole if a stock is
holding above the vwap for any considerable period of time it's a very good indication of strength
and it might be an indication that we should get long the stock for a swing trade if there are also
other positive indicators to use as well the next swing trading indicator we're going to go over in
this video is the relative strength index or rsi rsi was developed by j wells wildler
and it's actually a momentum oscillator that just measures the speed and change of price movements
the rsi oscillates between 0 and 100 traditionally the rsi is considered overbought above 70 and
oversold when it's below 30. signals can be generated by looking for divergences and
failure swings rsi can also be used to identify the general trend in an uptrend or bull market the
rsi tends to remain in the 40 to 90 range with the 40 to 50 zone typically acting as support during a
downtrend or a bear market the rsi tends to stay between 10 to 60 with the 50 or 60 zone acting
as a resistance these ranges will vary depending on the settings that you have and the strength of
the stock or market's underlying trend as well so typically people use rsi as a sort of warning sign
they think okay the rsi of a stock is super high it probably cannot keep rising it's overbought
so i'm going to short the stock or wait for a pullback and on the other hand if the rsi of a
stock is super low it's at 20 or 30. well the rsi is so oversold that maybe i'm going to be so smart
and go in and buy the stock before the reversal that's kind of on the most basic level how people
tend to use it now the better way to use rsi is to look for discrepancies between the indicator and
the actual stock prices price action i mentioned this in my swing trading strategies video which
i will link to below and if you want like an even more in-depth explanation i go over it
pretty extensively in that video so i recommend you check it out essentially an rsi discrepancy
occurs when a stock price is rising but the rsi is declining it can also occur in the reverse with a
falling stock price where the rsi is rising now this discrepancy in the rsi in the stock price
is a pretty strong signal that something is just not quite right if a stock's price is continuing
to rise up but the rsi which is really measuring momentum is declining then that trend obviously
cannot continue so we're taking a look at apple here and what's pretty interesting is we actually
have a very strong divergence now i didn't even really prepare this i knew i was making this
video so i went through a couple stocks and sort of stumbled upon this and i was pretty surprised
by it so we have our rsi down here which we know predicts momentum and we have the stock price up
here well as we know a divergent is when the rsi and the stock price are not sort of on the same
page so let's look at what the stock price has been doing it's been rising steadily for
about a year now i'm on the weekly chart and let's look at the rsi or momentum well we see
lower peaks in momentum with higher stock price peaks okay so this is like a classic divergence
and it's actually pretty extreme so we see the momentum dying out here right rsi uses
volume and buying pressure to sort of predict swings and momentum well this cannot this rally
cannot continue on lower volume like look the volume's also been shrinking up and lower rsi this
is just on the weekly chart we want confirmation on multiple time frames so let's check the
uh daily chart as well i'm here on the 180-day four-hour chart and we see a sort of similar
pattern right so we have the stock price moving up pretty aggressively but if we go from these same
the rsi is basically stayed flat and is actually slightly declining right so this is not as extreme
on the weekly it was even more pronounced then as a side note longer time frames are always
a little bit more accurate if you see a pattern on a short time frame you kind of want to go to the
longer time frame to confirm it so another example here let's look at tesla so what are we looking
for we're looking for a divergence between the stock price and the actual rsi so rsi down here
and the stock price what we see here we have lower peaking rsi right this peak is lower than
this peak so obviously the stock price should be declining as well because a rally cannot continue
with lowered momentum well what do we get when we're looking up here well this thing has been up
trending extremely aggressively for like how long is this for 61 days on lower and lower momentum
guys i'm not a financial advisor so i cannot tell you what to do but this is a pretty extreme
um just think of it if there's less volume and less momentum on a stock how can it
continue its uptrend right i mean this is pretty extreme right increasing stock price
on lower momentum these things don't last forever it's just not possible
now i'm not saying tesla is going to crash or anything but it's due for a correction and a
pretty big correction in my opinion so let's look at a larger time frame here the one year one day
and same thing right we it's not as pronounced but when we zoom out here
from this peak to this peak of the stock price and then let's look at the rsi from that to the
current rsi it's slightly downtrending right it's not as pronounced but still
you need increasing volume we actually have less volume
up here in these bars and we have less momentum as the stock price is continuing to rise it's just
it's not sustainable look anything can happen right but it's just statistically unlikely that
the stock would continue to rise without any pullback as the rsi which is momentum
is staying totally flat okay if you have any specific questions on swing trading or
investing in general drop them in the comment section below also feel free to suggest something
that you want to learn about so i can make a video on that and if you want you can also reach out to
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so that i can continue making these videos for you guys thanks for watching
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