Traders around the world dream of an indicator which is able to give them a true trading edge. This would make placing profitable trades much easier to do. Swing traders are no different and they constantly search for some indicator which can give them an edge in their trading. Having an indicator that was able to warn or show when markets were nearing turning points would make swing trading much easier. As swing traders are looking for new market swings, being able to know when and where these new swings were about to begin would be a definite advantage. If you could know in advance when a market was ready to turn, this would greatly increase your chances as a trader of entering into a profitable trade. Luckily, there are indicators already available that can do exactly this. These indicators are known as momentum indicators.
Most indicators take price from the past and plot this visual on a chart. All this shows is what price has done in the past. It does not mean or offer a trader a glimpse into what price may do in the future. Many traders argue that looking at data from the past offers no benefit to trading at all. While many indicators are lagging, momentum indicators are leading. Basically, momentum indicators offer an insight into what price may do in the near future. Momentum indicators work on the basis of measuring a currency pair s level of momentum. As a currency pair begins to slow down and lose speed or momentum, momentum indicators alert you to this change in speed or momentum. How can this be of any use? When a market is losing momentum it commonly undergoes a retracement or lull. When this happens, traders have an opportune time to either enter or exit the market for maximum profits. Measuring the momentum of a market makes it easier for traders to know where price may go in the near future and manage their trades.
A very popular and widespread momentum indicator is RSI. The RSI (relative strength indicator) shows levels of a currency pair that are considered overbought or oversold. When the indicator is in these areas, a trader should be on the lookout for potential price retracement. When a market enters these areas of overbought or oversold, more often than not price will experience some kind of adjustment in the near future. Knowing that an adjustment of price may happen, you can manage your trades before it is too late and essentially increase your trading edge. Since swing trading is all about taking slices out of market swings, it should be clear as to how useful and powerful RSI and other momentum indicators can be for swing traders.
If you want to know future price movement in advance, then take a look at momentum indicators, especially the RSI, today. Of all the momentum based indicators, RSI is the most widespread and widely used. The RSI may just be the indicator you have been looking for to gain an edge over the market.
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