Which Swing Trading Indicators Give You That Needed Edge?

Swing traders could not ask for much more than an indicator that offers the ability

to know in advance or at least get a glimpse of where and when the market they were trading was at or approaching its turning point. If you could know in advance when a market was ready to turn, this would greatly increase your chances as a trader of entering into a profitable trade. Buying at bottoms and selling at tops is what rookie traders dream of doing. Do indicators exist which improve your chances of doing this? Luckily, such indicators already exist and when used properly they offer to give you an enormous edge while trading. These indicators are known as momentum indicators and are available for free and can be applied to any market.

The majority of indicators are known as lagging indicators. By their nature, all information and data they display is based on past movements of price. They offer no insight into where the market may be going but instead where the market has already been. Another group of indicators, momentum indicators, are known as leading indicators. 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 rate at which price is changing slows down, the indicators warn of this and alert traders that a possible retracement in future price movement may be about to take place. Measuring the momentum of a market makes it easier for traders to know where price may go in the near future and manage their trades much more effectively.

RSI is one of the most popular and widely used momentum indicators available today. The RSI (relative strength indicator) shows levels of a currency pair that are considered overbought or oversold. When the indicator is in or approaching these areas, a trader should be on the lookout for potential price retracement or rallies. These areas are known as extreme points in the market, where price has over extended itself and may be approaching a turning point. When a market enters these areas of overbought or oversold, there is a fairly good chance that it will retrace in order to adjust to the new price levels before it continues moving. Being able to know that price may make an adjustment in the near future, you can manage your trade before it is too late and essentially increase your trading edge. You would have a great advantage over the market if you knew there was a high chance that price was approaching a possible bottom in the market and could close out any sells or shorts you had to maximize your profits before price turned against you.

Momentum based indicators are the only leading indicators available that offer you a chance at an insight into future price movement and are a favourite of swing traders. No other momentum indicator comes close to the popularity of the RSI. The RSI may just be the indicator you have been looking for to gain that much needed edge over the market.

by: Creztor Tessel

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