In swing trading, it is very important for you to use the trending indicators for a trending stock or security and a ranging indictor to a ranging stock or security. Before swing trading a stock or a security, you need to determine whether the stock or the security is trending or ranging. You need to do this right in order to make your swing trading a profitable success. Discover an award winning Forex Trading System that made 2,956% PROFIT in just 1 month. Get these Swing Trading Informants FREE! Watch this Freedom Forex Formula video that shows a FREE Forex Method that makes 7,913 pips from just one market move and helped grow a $34M forex business. Get this special manuscript that explains the Forex Method in step by step detail FREE!
As a swing trader, you should only rely on the hourly and daily charts. Anything longer is only appropriate for position traders or buy and hold investors. Now, if you are satisfied with your eyeballing the charts, you can use an indicator that can tell you about the strength of the trend.
The most popular indicator that shows whether the security is trending or ranging is the Average Directional Index (ADX). ADX actually measures the strength of the trend rather than it’s direction. It oscillates between the value of 0 and 100. The standard setting for ADX is 14 days period.
If the ADX is below 20, the security is in a trading range and if the ADX is above 30, the security is considered to be trending. Readings between 20 and 30 are mostly ambiguous. When the reading is between 20 and 30, if the ADX is rising and above 20, you can take it as trending. And if ADX is falling and below 30 but above 20, you can take it as the security is in a trading range.
