Role of Accumulative Swing Index in Foreign Exchange Trading

Traders use different tools to analyze various patterns in the market that guide them about the reversal, continuous trends or new trends that are happening in the Foreign Exchange Trading. This is very necessary for them as decisions pertaining to buy and sell are based on this. There many widely used technical indicators in the market. Some give clues about market trends, some about volume, or others may give idea about market divergence. In this article we are going to discuss about one such technical tool that is used by traders in forex market for confirmation about divergence. This is popularly known as Accumulative Swing Index.

 

Define Accumulative Swing Index:

This tool is developed by Welles wilder and is mainly used as a tool that gives idea about divergence, and gives buy and sell signals based on this confirmation. This was designed for traders who trade in futures market in foreign exchange. Market experts believe that this tool shows the cumulative total of the popular swing index. It contains very unique characteristics that can quantify price swings in the market. It also shows short term swing points that are very beneficial for foreign exchange trading. Finally it shows the real market strength or weakness from the complex maze of various prices. We know that the accumulation swing index shows cumulative total of the swing index, thus, for calculating this figure, it require opening prices of desired currency pairs.

 

A confirmation tool in Foreign Exchange:

Accumulative Swing Index is used as a confirmation tool, and hence confirms the signals generated by patterns of trendlines. It shows buy signal when this index line breaks above a downwards moving trend line. Traders are even advised to buy when the price is moving in consolidation period, above the resistance line. On the other hand, it gives sell signal when this index line breaks below an upwards moving trend line or in the case where in the consolidation price period that below support levels. Since its main goal is to depict real market, thus it resembles actual price levels.

 

Interpretation:

Traders in foreign exchange market term this indictor as the fluctuations indicator. his indicator basically attempts to show the phantom line that lies in the maze of different price levels pertaining to open, high, close and low. Typically this analysis also looks out for any breakouts, divergence or new peaks (low or high) in the real market condition. It is advised that before using this feature, chartists must have good command over trendlines, as only then can they be able to interpret any type of trend lines breakout or new positions in the market. It was formulated for futures market, however can be used efficiently in different financial markets

 

 

 

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