When is a swing point significant, in your opinion?
- Thread starter InTheZone
- Start date
its basically a local minimum or maximum in the price graph. its the lows and the highs. the peaks and the bottoms. when you actually try to quantify it like "i require bar X to have 3 bars on each side from it to have lower highs than bar X, then bar X is swing high" then it gets tricky.
Yes, they are very significant especially on the higher time frames.
You will find the "swing points" do tend to occur near the "pivots" and both definitely bear watching.
How can one tell it will pivot? That is a good question. That is what always bugged me about this strategy. It looks good on the chart, but in the moment it is not so exact. I use a stochastic to gauge the strength of the movement. But lately it is really a crap shoot and more about managing trades than entries.
You will find the "swing points" do tend to occur near the "pivots" and both definitely bear watching.
How can one tell it will pivot? That is a good question. That is what always bugged me about this strategy. It looks good on the chart, but in the moment it is not so exact. I use a stochastic to gauge the strength of the movement. But lately it is really a crap shoot and more about managing trades than entries.
Hi InTheZone.
Interesting question, suggesting we are thinking of different things by 'swing points'.
I tend to the strict definition - a swing high is formed when the low of a day with higher high and higher low than previous days in an uptrend is breached by a day with a lower high and lower low. A swing low forms when the high of a day with a lower high and lower low than previous days in a downtrend is breached by a day with a higher high and higher low.
Easy to see, bloody hard to write.
See Dow 15th Oct - higher high and low than previous days, in obvious uptrend. 15th Oct became swing high when 16th Oct made lower high and lower low and breached the low of 15th.
Possibility for aggressive traders to sell as the low is breached on the 16th. Others await swing low for chance to buy into uptrend in dip. This comes 27th - opportunity to buy as high 9632 of 24th swing low is breached.
Hope this clear.
Interesting question, suggesting we are thinking of different things by 'swing points'.
I tend to the strict definition - a swing high is formed when the low of a day with higher high and higher low than previous days in an uptrend is breached by a day with a lower high and lower low. A swing low forms when the high of a day with a lower high and lower low than previous days in a downtrend is breached by a day with a higher high and higher low.
Easy to see, bloody hard to write.
See Dow 15th Oct - higher high and low than previous days, in obvious uptrend. 15th Oct became swing high when 16th Oct made lower high and lower low and breached the low of 15th.
Possibility for aggressive traders to sell as the low is breached on the 16th. Others await swing low for chance to buy into uptrend in dip. This comes 27th - opportunity to buy as high 9632 of 24th swing low is breached.
Hope this clear.
Larry Williams (in his book Long-Term Secrets to Short-Term Trading) suggests a Greatest Swing Value (GSV) concept to calculate Swing Points.
He thinks this is the most powerful method, and the most solid and logical approach to volatility breakouts.
Very roughly (since I never use it):
1. Today's close lower than the close 5 days ago, suggesting Yin may turn into Yang;
2. A Buy Swing Value is the (last) 4-day average of the difference from the open to the high; A Sell Swing Value is a mirror image (based on the distance between low and open);
3. A buy signal (generated only after down days) is 180% of the Buy Swing Value plus tomorrow's open;
4. Stop is set at 225%;
5. Take profits on the first profitable opening after being in the trade for 2 days.
Any comments from actual trading, or backtesting?
He thinks this is the most powerful method, and the most solid and logical approach to volatility breakouts.
Very roughly (since I never use it):
1. Today's close lower than the close 5 days ago, suggesting Yin may turn into Yang;
2. A Buy Swing Value is the (last) 4-day average of the difference from the open to the high; A Sell Swing Value is a mirror image (based on the distance between low and open);
3. A buy signal (generated only after down days) is 180% of the Buy Swing Value plus tomorrow's open;
4. Stop is set at 225%;
5. Take profits on the first profitable opening after being in the trade for 2 days.
Any comments from actual trading, or backtesting?
I follow the the swing guide lines from the radio talk show host / author Tom O'Brien. His basic concepts combine price and volume.
1) When a swing high price is broken on higher volume ... this is confirmation that the stock price wants to go higher. (High demand)
2) When a swing high price is broken on lower volume ... this is confirmation that the stock price wants to retrace. Set a close stop or close the position. (Low demand at the higher price.)
I also found a real neat EOD charting program that displays swing points at the click of a mouse button. It is called stocksharev2. www.stocksharepublishing.com
1) When a swing high price is broken on higher volume ... this is confirmation that the stock price wants to go higher. (High demand)
2) When a swing high price is broken on lower volume ... this is confirmation that the stock price wants to retrace. Set a close stop or close the position. (Low demand at the higher price.)
I also found a real neat EOD charting program that displays swing points at the click of a mouse button. It is called stocksharev2. www.stocksharepublishing.com
Another Swing site is from LBR:
http://www.lbrgroup.com/index.asp?page=SwingTrading
http://www.lbrgroup.com/index.asp?page=DailyCharts
http://www.lbrgroup.com/index.asp?page=SwingTrading
http://www.lbrgroup.com/index.asp?page=DailyCharts
What a big question.
Ultimately when a number of important factors converge to give extra weight to the reversal.
Look left and compare S&R, velocity matches, swing amplitudes, PA quality, volume, percentage moves, swing counts, multiple time frame context, energy, momentum, time, structure, etc.
Gann used time and price in swing charts instead of only price to construct the swing which is an interesting concept to develop. He observed that a market would usually make 5 - 7 swings before a strong reversal but if there was an extension and 13 or more swings took place he would look for a very powerful over sized move.
Elliot had his infamous wave count and super cycles employing pattern, time and ratio.
There are many methods but I think the best is to find your own combinations and that will mean the significance depends on the values you can discover in different set ups.
OPâs been waiting 10 years for an answer (wonder if he is still trading, or even around)
Anyway â imo a swing point (pivot/ turn⦠or potential pivot/ turn â in my vernacular) is significant when;
Price respects it â at least for the time being
This respect is shown in the follow manor;
Price zooms away from the pivot / turn... or price retests and then moves away (the latter being less significant)
Volume â either in abundance, or absent â is a good tell⦠as is the strength or weakness reflected in the bars
===============================
On the flipside;
These pivots / turns make for good targets â once price has made a top or bottom in the long term trend and is headed the other way
And â youâll typically (typically is not always btw) see some sort of bounce once price returns and hits these previous pivots/ turns â before ultimately busting through and continuing on its way to the next top or bottom (further indication you properly identified it initially)
================================
One should also not confuse these pivots/ turns w/ typical retracements created throughout a trading day - although occasionally they are one in the same... when you see that - its money
Just my dumb ass opinion of course
RN
Anyway â imo a swing point (pivot/ turn⦠or potential pivot/ turn â in my vernacular) is significant when;
Price respects it â at least for the time being
This respect is shown in the follow manor;
Price zooms away from the pivot / turn... or price retests and then moves away (the latter being less significant)
Volume â either in abundance, or absent â is a good tell⦠as is the strength or weakness reflected in the bars
===============================
On the flipside;
These pivots / turns make for good targets â once price has made a top or bottom in the long term trend and is headed the other way
And â youâll typically (typically is not always btw) see some sort of bounce once price returns and hits these previous pivots/ turns â before ultimately busting through and continuing on its way to the next top or bottom (further indication you properly identified it initially)
================================
One should also not confuse these pivots/ turns w/ typical retracements created throughout a trading day - although occasionally they are one in the same... when you see that - its money
Just my dumb ass opinion of course
RN