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Swing Line Indicator
  • : March 28, 2021
  • : Prashant Shah

Swing Line Indicator

Swing breakout patterns are extremely useful for traders using the Renko charts. I have explained them in detail in my book “Profitable Trading with Renko charts”.

When price exceeds immediate previous swing high, it is called as a bullish swing breakout. When price falls below immediate previous swing low, it is called as a bearish swing breakout.

The image displayed below captures the bullish and bearish swing breakouts.

From a trading perspective, if we buy on a bullish swing breakout, the stop-loss can be kept below the previous swing low. Because if price falls below the previous low, it will trigger bearish swing breakout.

Have a look at below chart.

Green horizontal lines represent bullish swing breakouts, and the red horizontal line captures bearish swing breakouts.

Let us label bullish breakouts in the above chart.

First breakout is point A. Stop-loss for point A is previous bottom as shown in the chart. The stop loss was triggered immediately. The next breakout was at point B. The immediate previous bottom is a stop-loss for this breakout at B. The breakout at B1 is the continuation swing breakout while the earlier swing breakout traders are still holding their position. Stop-loss is trailed to previous bottom as shown in the chart. B3 is another continuation breakout that also results in trailing the stop-loss to higher level. The stop-loss for B3 gets triggered and this might also result in trailing stop loss for earlier positions getting triggered too.

Bullish swing breakout at C is another breakout that offers an entry with a comparatively low risk.

Hope above charts explains how we can trade swing breakouts in Renko charts. The Swing line indicator created in TradePoint plots a line at swing breakout level. Have a look at the chart below.

Green line shown in the above chart plots swing level. Price going above green line is bullish swing breakout and falling below green line is bearish swing breakout.

Plotting swing line has an advantage. We can easily see how far is swing high or low from the current price. Have a look at chart below.

Swing high got triggered at 193.20. Swing low breakout level is 178.42 that we can come to know by looking at swing line level. It also shows how far price is from current price level in absolute and percentage terms.

Absolute difference between price and swing line is 14.78 points. It is 8.29% away from current price.

This can help in placing the stop-loss while trading and assessing the risk for Renko chart swing breakout traders.

Swing line can also be useful from analysis perspective. Below is a Renko chart with swing line.

Rising swing line and falling swing line shows strong trend. Swing breakout after swing line moves in a box is important.

Other indicators such as moving average, super trend or other momentum indicators can also be plotted along with it.

For example, trading based on bullish swing line crossovers when brick zone is in bullish zone. Trading bearish swing line crossovers when brick zone is in bearish zone could be an interesting combination for traders.

D-MAST along with Swing line is another example.

Explore these indicators and combinations and you can come up with a robust trading system based on these indicators.