How To Use Swing Highs & Lows In Your Trading
What are swing points?
A swing point on your chart is simply a turning point for price in the past, either to create a considerable pullback into an established trend, or to reverse it altogether.When a turning point creates a mere pullback it can be classified as a minor swing point.
When it creates the base to reverse a trend, it is classified as a major swing point.
Why are swing high and swing low formed?
A swing high and swing low is formed due to what is known as support and resistance. The technical explanation for support and resistance is as follows:
A support forms for the price when you notice that there are more buyers than sellers at a certain price. The demand for the asset or the stock overwhelms the supply and thus pushes price higher.
A resistance forms for price when you notice more sellers than buyers at the price level. In this case, price fails to move higher and therefore declines.
Use cases
Swing points can be paired with several indicators and strategies. One of the most common tool we use with them is the Fibonacci retracement.
Fibonacci retracement is a technique that uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the market continues in the original direction.
Summary
Swing points are highs and lows in a trading instrument and crucial for trend analysis.
They signal changes in the direction of the pair, from uptrend to downtrend or vice versa.
These points represent levels of support and resistance, essential for determining market direction.
Traders use swing points to make informed decisions about entering or exiting positions in the market.
