Welles Wilder has developed the technical indicator called Swing Index indicator to determine the real strength and direction of the market by analyzing the high, low and close prices of a stock. He describes how to create and use the Swing Index in his seminal book “New Concepts in Technical Trading Systems“.
The traders can know more about the Swing Index Indicator, then they can find it in the STUDIES section of Zerodha Kite. This is also available in Kite mobile App. The Limit Move Value is 0.5 and you can set the value of it high and low. You can also check the image below to understand how we attached the Swing Index Indicator in HDFC Bank share price chart. In this indicator on to any charts likes daily, weekly, monthly or intraday you can attach.
The formula of Swing Index Indicator :
C = Today’s closing price.
Cy = Yesterday’s closing price.
Hy = Yesterday’s highest price.
L = Today’s lowest price.
Ly = Yesterday’s lowest price.
K = The largest of Hy-C and Ly-C.
O = Today’s opening price.
Oy = Yesterday’s opening price.
R = The relationship between today’s closing price and yesterday’s high and low prices.
T = The value of a limit.
Interpretation of the Swing Index Indicator :
The indicator formula uses high, low, open, and closing prices to calculate these values. When the index line falls below the zero line it represents a fall in the stock’s price. Similarly, when the Swing Index crosses above the zero lines, it represents that a stock’s price is increasing. Also, a small or large swing index value shows the strength of the stock’s price’s increase or decline. This indicator is an oscillator with values that range from 0 to 100 for up price movements and 0 to -100 for down price movements. Simple buy signals can be generated when the SI line crosses above the zero lines from below. In the same way, simple sell signal can be generated when the SI line crosses below the zero lines from above.
Conclusion of the Swing Index Indicator :
Traders can use to determine the real strength and direction of a stock by analyzing its high, low and close prices of this Swing Index indicator. In strength of a stock, traders can confirm if a stock’s current trend will continue or they are looking for signs of weakness which alert them to possible trend direction changes. The traders and investors can increase their probability of success by employing multiple indicators to confirm trading signals like all technical indicators. Traders have seen the Swing Index indicator is a versatile tool that can be used by investors and traders to improve their odds of trading.