Friday, 23 October 2009

What are the Best Swing Trading Indicators?

Having an indicator that was able to warn or show when markets were nearing turning points would make swing trading much easier. Knowing when markets were about to rally or retrace would make it easy to pick the perfect entry points for your trades. Luckily, such indicators already exist and make trading much easier. These indicators are known as momentum indicators.

The majority if indicators are known as lagging, but momentum indicators are leading and lead price. Basically, momentum indicators offer an insight into what price may do in the near future. Momentum indicators work on the basis of measuring a currency pair's level of momentum. As the speed of change in price begins to slow down, momentum indicators help you to indentify this loss of momentum and warn that there may be a rally or retracement in the near future. Momentum is essential to managing any trades you have by knowing in advance where price may go.

A very popular and widespread momentum indicator is RSI. The RSI (relative strength indicator) shows levels of a currency pair that are considered overbought or oversold. When the indicator is in these areas, a trader should be on the lookout for potential price retracement. When a market enters these areas of overbought or oversold, price typically adjusts to the new levels before it continues on. Being able to know that price may make adjustments in the near future, you can manage your trades before it is too late and essentially increase your trading edge.

If you are looking for someway to know in advance where price may go, check out what momentum indicators. The RSI is one of the oldest and most trusted trading indicators available. This may just be the trading indicator that you are looking for to give you an edge in your swing trading.