Getting the Hang of Swing Charting Understanding swing charting can help in identifying trends which can enable you to make the right decisions. TradeZero Ocean Place Cable Beach, Unit #1 Nassau, Bahamas
For consistently successful stock trading, you need to study charts. Charting provides objective analysis of data and helps you make the right decisions. The Popularity of Swing Trading Swing trading is quite popular now among traders thanks to the strong trends the stocks have been exhibiting. Trends are most commonly identified using the swing chart. Swing charts can therefore be really useful. You need swing charts for technical analysis. What swing charts do is reveal the stock market trends and nothing else. So, investors and traders can easily track these trends. Why are these trends important? Why Swing Charting Is Important Analyst Justin Kuepper, in his Investopedia article, explains: Trends are the basic methods to make profit. Swing charts only give you what’s necessary, avoiding factors such as market noise that can’t be relied upon. So you can apply other kinds of technical analysis more accurately.
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Swing charting has various techniques. Primarily among these techniques are the Gann-based charts and the Kagi charts. These techniques help you locate trends, but in a manner that is more complex. With these techniques you can also make empirical changes to further improve their capability of finding trends. Creating Swing Charts Let’s understand how to construct swing charts. Swing charts basically consist of price bars that represent price behaviour at a particular point of time. Kuepper presents a basic bar chart:
A bar chart is a very common kind of chart, with the vertical lines representing price range. The left peg depicts the opening www.tradezero.co
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price while the right peg stands for the closing price in a given period of time. Using the highs and lows, there are many ways to create a swing chart. Kuepper focuses on the Gann swing charting technique. This method contains four turning points: Up day, depicted by green – higher high & higher low Down day, depicted by red – lower high & lower low Inside day, depicted by black – lower high & high low Outside day, depicted by blue – higher high & lower low Bar Chart with Turning Point With all these turning points depicted, the simple bar chart of above transforms to this:
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The two points depict the beginning or ending of a trend. In other words, it indicates when to enter a swing trade or when to exit it. With these points marked, the swing chart can be constructed. For this, you need to eliminate the time factor and move the points together at equal intervals without disrupting the order. Then, all you need to do is connect the points and complete the chart. This will result in the following image:
As you can realize, it’s a lot easier to see the price trends with this Gann swing chart since the time factor has disappeared. With the time factor and market noise removed, swing charts can help you view market trends easily.
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