Swing Trend Analysis

Swing trend analysis is a classic tool you may use to determine the general direction in which the market is moving. Trends are characterized by a series of highs and lows, forming a series of successive waves. Specifically, a swing trend analysis indicator plot connects the alternating swing highs and lows. When a new price bar is added, the current leg is either extended, or a new leg is added in the opposite direction. The Swing Trend indicator is available from our premium suite.

In the below chart, we see a bullish market structure with continuous higher highs and higher lows. Then, towards the end we see the start of a bearish trend, first setting a lower high and then breaking the prior swing low.

ZigZag Indicator for NinjaTrader 8
Bullish Trend ending with a break of the Higher Low

Belowis a chart displaying continuous lower lows and lower highs. In order for the trend to change back to a bullish structure, you first need a higher low, followed by a price break above the prior lower high.

Swing Trend Indicator for NinjaTrader 8
Bearish Trend ending with a break of the Lower High

In other words, market structure and swing trend analysis is a technical term for describing what the market has been doing in the past and what it needs to do in the future in order for the bulls or the bears to maintain their position.

The Swing Trend Analysis Indicator Plot

As mentioned, the swing trend indicator plot connects the alternating swing highs and lows. There are two conditions required for drawing a leg in the opposite direction:

  • Prices must retrace by an amount equal to or larger than the set minimum deviation
  • Prices must take out the highs of the prior N bars for a new leg up or prices must take out the lows of the prior N bars for a new leg down where N is called the swing strength

You may set the minimum deviation in points, ticks, as a percentage or as a multiple of the average range or average true range. The swing strength is set as an integer larger or equal to one. Specifically, the swing trend indicator plot is built by selecting the minimum deviation, the swing strength or a combination of both. If you set the minimum deviation to 0, the zigzag plot is built by the swing strength alone. When the swing strength is set to 1, the zigzag is only built by the minimum deviation.

Major & Minor Swing Trends

You will see the start of a bullish trend when a higher low has formed, pursued by a price break above the prior bearish trend lower high. A continuous series of higher highs and higher lows will then ideally follow. You will see the start of a bearish trend starts when a lower high has formed, pursued by a break of the prior bullish trend higher low. These trend changes will plot as T-signals. The major trend information is also available via paintbars and/or background sharing.

In a long scenario, a key continuation signal will subsequently plot as a double triangle, once a higher low has been set and the minimum deviation has been broken, drawing a new swing leg up. Following the key continuation signal, single arrows will plot whenever a new higher low, followed by a break of the minimum deviation requirement.

The minimum deviation plots as a trailing stop line, representing the minor trend (also available as paintbars and/or background sharing). Depending on the configuration of the swing trend, you may use the trailing stop line to replicate a Chandelier Stop or ATR Trailing Stop.

Finally, you may also use the indicator to determine the size and the cumulated volume of the swing legs. Major and minor trend, trade signals and information on leg size and volume are accessible for trading strategies.

The Swing Trend Analysis indicator is also available from the premium LizardIndicators.com suite.