Trading price action alone
Price signals can be breakouts of a price range over a set number of days, buy
signals at 52-week highs, or sell short signals at 52-week lows in price. There are
traders that believe price alone is the only indicator you need.
Daily price versus previous day’s highs and lows
Trading today based on yesterday’s low or high
price range is a day trader
strategy. They also may trade the intra-day range of support and resistance,
buying the lows of the day or selling the high of the day short. Day traders like
intra-day volatility to give them opportunity to make money intra-day on price
swings and trends. Some swing traders set stops based
on the high or low of the
previous day’s price range.
Using moving averages
Moving averages are the average of prices over a specific time frame, and they
can give a trader a better overall view of a trend.
They are trend following
indicators and don’t do well in range bound markets. Moving averages can act as
entries, exits, and trailing stops. Trend following systems can be built based on
moving average crossovers to create buy and sell signals. Single moving
averages like the 200 and 250-day used alone in index
ETFs can outperform buy
and hold investing in the long term, for both higher returns and lower
drawdowns in capital.
MACD as a swing trading signal
The MACD (Moving Average Convergence/Divergence)
is a momentum
indicator that shows the relationship between two moving averages of prices.
The MACD is the difference between a 26-day and 12-day exponential moving
average. A 9-day exponential moving average, called the "signal" line is plotted
on top of the MACD to show buy/sell opportunities.
The MACD is profitable in
markets with wide swinging price ranges. It is not useful in flat or markets with
very tight price ranges. I have found the MACD to be the most useful as a swing
trading indicator after crossovers. The Moving Average Convergence
Divergence can work to show short-term reversals
inside the longer term trend
for swing traders. It can be part of a filter for other signals or a signal in itself.
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