What is meant by Swing High and Swing Low, how can be used for trading (setting Target & stop loss) ?
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Price does not move in straight line but in a zig-zag manner or a wave form. When ever price moves down and then turns up, it is known as swing low. Similarly when price turns down after moving up, it is known as swing high. Technically each turn around is a swing high or low. But there are different ways to identify important swing points like
1) Gann's swing for a swing low preceding n-Cancdles and following n-Candles have higher lows. Similarly for swing high preceding n-Candles and following n-Candles have lower highs.
2) % retracement from last high/low
For long trades, last swing low (below the entry price) can be kept as stop loss and last swing high (above the entry price) can be set as target. Similarly for shorts prior swing high (above the entry) can be kept as stop loss while last swing low (below the entry price can be target).
Swing High/Lows have several other uses like identifying trend, creating trend lines and channels, calculating Fibonacci retracement and extensions etc.
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