How to Identify Swing High and Swing Low to Boost Your Profit

Did you know that learning how to identify swing high and swing low on any given chart has a massive possibility of improving your success as a trader? By identifying swing highs and lows correctly, you’ll be able to stop and/or target in the correct place to boost your profit.

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We know that learning how to identify swing high and swing low is very important. Hence, we wanted to write an article that will teach you about swing high swing low trading.

Here’s what this article will cover:

  1. What is swing high and swing low trading, and how do you identify them correctly?
  2. Why defining the correct swing is directly connected to your win rate and profitability.
  3. A short exercise for identifying swing high and swing low (at the end) to help ensure you fully understand today’s lesson.

What Is Swing High and Swing Low Trading?

A swing high swing low (SHSL) trading is a piece of price action where multiple candlesticks, or bars, are grouped together. They are considered to be part of one move in a specific direction. The swing high and swing low movement is commonly called a leg, a ‘move,’ or simply a swing.

We call this a “swing” because it’s one piece of the price action in a specific direction. It is always followed by a swing in the opposite direction OR a sideways move.

If it’s followed by movement in the same direction, it would be a continuous part of the same swing. Price “swings” back and forth in the market, which is where the name is derived from.

The swing high is, of course, the highest price of the given move. Likewise, the swing low is the lowest price of the given move. Here is a strategy you can read about, and it’s called the risk-to-reward ratio.

How to Identify Swing High and Swing Low Correctly

When the market makes two consecutive higher highs and higher lows or two consecutive lower lows and lower highs, it is considered a swing. Swings come in all different shapes and sizes.

You can identify all of them by using the simple rule about consecutive higher highs and higher lows, or vice-versa. Like most things in trading, the easiest way to get a handle on this is to view examples.

Remember, we’ll have an exercise at the end to make sure you understand this properly. Here, you can see a typical bullish swing. Notice that we have two consecutive higher highs and higher lows:

A Typical Bullish Swing.
Up swing

And just the opposite, here’s a typical bearish swing. Again, both new highs and lows are moving down:

A Typical Bearish Swing.
Down swing

That was simple, but what about when the price is moving up and down and making non-consecutive highs and lows?

Just remember, if there is a lower low in the midst of a bullish swing, it continues to remain bullish until there are consecutive lower lows and lower highs. Take a look at this example:

Noticing A Lower Low In The Midst Of A Bullish Swing.
Multiple swings

Bullish swings are blue, and bearish swings are red. Notice towards the end of the swing, there is a surge down where a lower low is created.

However, there is no consecutive lower low after that, so it remains a bullish swing. Let’s take one last look at some real charts to highlight the swings.

Highlighting The Swings In A Chart.
Real highs and lows chart

Each time a move down makes two lower lows and lower highs, we know it’s a separate bearish swing. We know it’s a bullish swing each time the currency starts moving up, making two consecutive higher tops and bottoms.

They continue to count as one swing until a separate swing forms in the opposite direction. Many times, the market will make a new high in the midst of a downtrend. This is just a fake and does not mean anything unless there is a higher low after the new high and then another higher high.

Here’s an example of how that looks in the market:

Making A New High In The Midst Of A Downtrend.
Fake higher high

Notice the market surged up to make a new high. It was followed by a new low in the midst of a downtrend. So, we ignore that high and include it as part of the bearish swing.

Using the Correct Swing to Increase Profits

Now that you know how to identify the correct swing on a given time frame, use this information to become one of the most successful traders in swing high swing low trading.

Knowing Where the Technical Stop Placement Is

If you identify the correct swing, you automatically know where the technical stop placement is for a given trade. Always stay 7-20 pips below the low of the bullish swing for a buy and above the high of the bearish swing for a high.

Drawing a Fibonacci Extension to Identify High-probability Target Areas

Knowing the correct swing means you can draw a Fibonacci extension to identify high-probability target areas. See, without understanding how to identify the right swing, you won’t be able to place your stop OR your target in the right place.

To demonstrate the true importance of this, let’s look at an example of our Double Trend Trap trading method. The DTT Method is a great strategy based on trend continuation.

Watching out for Huge Implications

Identifying the correct swing with this strategy has huge implications. The DTT strategy looks for counter-trend moves, then draws a trend line on the counter-trend structure and waits for the break back into the direction of the trend. Here’s an example:

Looking For Counter Trade Moves
Looking for counter trade moves

Here, the EUR/GBP has built a small counter-trend structure and is now breaking to the downside. This means that we are ready to short the market. However, we need to know where we will take profit and where we will put our stop loss. Using the information we’ve learned in this article, we can quickly identify the most recent swing:

Identifying The Most Recent Swing.

Now we know that the stop should be placed above the high of the recent swing, so we’ll identify the top and put our stop a few pips above that:

Putting A Stop Loss

That’s the easy part. The big question is, “Where do we put our target?” Well, Fibonacci extensions make GREAT targets, but ONLY if you identify the correct swing. That’s what makes this article so important. You’ll place the target too far away without identifying the correct swing and kill your win rate.

Because we know the correct swing, we can draw a Fib and put our Target a few pips inside the 161.8 extensions so that we have a good size target AND a high probability of winning this trade. I simply draw the Fib from the swing low to the swing high and then place my target inside the 161.8 extension level:

Adding Fibonacci Extensions.

Now, we wait and see. I’ll remove the Fib now that we have the SL and TP placed, and we will see how this trade develops:

Seeing How The Trade Develops.

As you can see, the market surged right down to our extension level and stopped. Though not all trades will work out perfectly like this example trade, this is a fairly common occurrence.

In cases like this, picking the right swing is of HUGE importance. Many traders might simply grab the entire bearish move on the chart as the recent swing (I have seen this a lot) to draw their Fibonacci extension.

The problem is that, by doing so, they have dramatically reduced the chance that the trade will now hit their target. In the EUR/GBP example, using the entire bearish move leading up to the trade would have resulted in a stop-out instead of a nice target.

When it comes to swing high swing low trading, with every loss, you can trade-in for a win that is of huge significance. Just increasing your win rate by a tiny amount (assuming all else remains equal) can completely reverse your results as a trader.

I hope this article illustrates the connection between identifying market swings correctly and the ability to win a high percentage of your trades.

If you use this article as a resource and take advantage of this lesson, you will see a boost in your win rate fast.

This is a must-learn lesson for every trader. To ensure you fully understand it, here’s a short exercise for you to complete. Also, feel free to read about the trader’s tech and installing MT4 EAs with indicators.

Training Exercise for Swing High Swing Low Trading

  1. Look at the EUR/USD Daily chart for the total year of 2014. It should look something like this:
Eur/Usd Daily Chart For The Total Year Of 2014
Eurusd daily 2014

  1. Identify each swing (both bullish and bearish) that’s occurred on the chart so far.
  2. Take a screenshot of the identified swings and submit it in the comments below this article.
  3. We’ll get back to you to confirm you did it right or to critique your work.

Final Thoughts about Swing High and Swing Low

Understanding how to identify swing high and swing low is of paramount importance. This knowledge not only sharpens your market analysis skills but also enhances your ability to make informed trading decisions.

By mastering these concepts, traders can better anticipate market turns and trends, leading to more strategic entry and exit points. This technique is particularly valuable in volatile markets, where accurate predictions are key to maximizing profits and minimizing risks.

Ultimately, these skills are foundational to developing a robust and effective trading strategy.

Thanks for taking the time to read this article, and we look forward to seeing your completed exercises!

Please leave a comment below if you have any questions about swing high, swing low trading!

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  1. Nathan, I’m not sure your definition is complete. First, you need to define what constitutes a “high” and a “low”. (I’m assuming you are using the standard fractal definition – two bars to the left and two bars to the right that are lower/higher than the high or low. But, without clarifying, technically the extreme of each candle could be considered a “high” or a “low”.) Secondly, what happens when you have a continuous run of higher highs with no lows in between, or vice versa. For example, according to your definition, the period from June 4 to the present (June 18) on the EURNZD daily chart would not constitute a bearish swing, because there are no lower highs in it.

    • Hey Dave, thanks for the feedback! I’m sure that Nathan indeed is using the two bars to the left and 2 bars to the right like we do in the trading room to spot tops and bottoms but let’s wait for his confirmation. The EURNZD looks like a bearish swing to me too. Someitmes the momentum can be strong indeed.

    • Hi Jordan, great job with the screenshot. We appreciate the fact that you took the time to learn via this excercise. On top of that, you provided excellent work! In my opinion most of the squares you drew on the chart are important tops and bottoms, although not all of them I would consider vital. When looking for swings we want to focus on the key tops and bottoms. For instance, the 4th square from the right I would not consider a swing bottom because the move still continues lower before it faces a lower high.
      Thanks for the post and screenshot, great job!

    • Hello Josh, thank you too for taking the time to learn via this excercise! It is a great that you took out the time to complete this. You did an excellent job! All the swings shown in this screenshot make sense to me. Great work.

    • Hello Thumper, great job on your screenshot. Excellent work. It’s great to see the detail that you provided in the chart. Candle stick patterns help spot the turning moment and I can see that all of your swings make sense.

  2. Nathan, In the above discussion and example to go Short, even though the trend line has been momentarily broken, the Swing pattern wasn’t. There still were higher highs and higher lows… So why did you have a set up to go short?

    • never mind.. I see that the larger, over all trend was down and that the set up to go short was on a pullback….

      • Thanks Ron for the feedback and post! Yes indeed – that upside was a corrective swing, then followed by an impulsive swing. No probs; it’s always good to double check with a question. Do you want to post a chart as well? Happy Trading!

  3. Thanks Nathan for the excellent article!
    I will join in with my contribution for the mentioned excercise. The brown circles indicate what I consider to be the swing highs and swing lows. I consider the bottoms and tops that do not have a circle to be part of an ongoing swing high and swing low. If anyone has questions, please let me know.
    I am looking forward to see the charts of many more!

  4. Thanks Nathan for the excellent article!
    I will join in with my contribution for the mentioned excercise. The brown circles indicate what I consider to be the swing highs and swing lows. I consider the bottoms and tops that do not have a circle to be part of an ongoing swing high and swing low. If anyone has questions, please let me know.
    I am looking forward to see the charts of many more!!

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