5 Essential Indicators For Swing Trading Futures

6 min readJun 20, 2024


Before we dive into the five essential tools for swing trading futures, let’s answer the question: What is a futures swing trader? A futures swing trader places trades with the goal of capturing overnight price moves for one or more days (versus day traders, who open and close positions within the same trading day). This approach allows them to capitalize on larger price moves that can occur over a more extended time.

Although swing trading can be more relaxed compared to day trading, it comes at a price: overnight and weekend price risk can be substantial, so traders must balance that risk with their trading objectives and employ appropriate risk management strategies.

How Do Futures Swing Traders Trade Differently From Day Traders?

At a high level, swing traders focus on price moves over a longer time period than day traders and look at longer-term chart intervals, often utilizing 30-minute, 60-minute, daily, and other charts. Their goal is to capture profits as price moves between the highs and lows in the chart, and they attempt to do so using technical indicators that are usually focused on reacting to market reversals.

Here are five key indicators that can assist those who are swing trading futures identify entries, measure trend strength, and recognize when the trend may be ending.

1. Futures swing traders use the moving average convergence divergence (MACD) indicator

The MACD indicator, developed by Gerald Appel, is a momentum indicator that can help spot trend direction. It’s based on the concept that the difference between two moving averages can help better identify trend direction and strength sooner than moving averages alone.

Traders watch for the MACD histogram to cross above or below the zero line, as the cross points may confirm the new trend direction and trader sentiment. (Figure 1)

  • When the MACD histogram (blue) is above zero, the price trend is moving higher, and the sentiment is bullish.
  • When it is below zero, prices are trending lower, and the sentiment is bearish.

Figure 1: Identifying trend with the MACD histogram.

2. How futures swing traders use Bollinger Bands

Bollinger Bands, created by John Bollinger, are a popular way to measure whether the market is overbought or oversold and may be near the end of a trend. The Bollinger Bands indicator is comprised of three lines: a moving average in the middle, and upper and lower bands that are a multiple of standard deviations +/- from the moving average. The most common settings for these lines are a 20-day moving average and two standard deviations for the upper and lower bands.

Bollinger Bands can also reflect the volatility in the market and are used to identify areas of price consolidation or expansion. When prices consolidate, swing traders look for breakouts; when prices expand, they look for turning points. Read “Bollinger Bands Explained” to learn more.

See Figure 2 for commonly used signals when using Bollinger Bands:

  • A new trend is implied when price closes outside of the upper or lower band after a consolidation pattern.
  • A change in direction is implied when price has been in a trend tracking along the upper or lower bands and the bar closes inside the bands.

Figure 2: Bollinger Bands reversal patterns and volatility squeeze breakout.

3. How to use on-balance volume (OBV) when swing trading futures

OBV, developed by Joseph Granville, incorporates volume to help assess changes in price. It’s a cumulative measure that adds or subtracts the volume traded, depending on whether price increases or decreases from bar to bar. Like many momentum oscillators, the measure should track the price in terms of trend, though discrepancies in the magnitude of moves between the indicator and price could indicate when trend might change.

An example of a bullish reversal is seen in Figure 3. Towards the end of a bearish trend, the OBV shows two troughs that are virtually the same value. This indicates that the volume on this downtrend is thin and the market may be ready to rally. A bearish reversal would show OBV’s inability to make higher peak highs while price is rallying. Learn more about volume analysis indicators like the OBV.

Figure 3: Bullish reversal using On-Balance Volume (OBV).

4. Using the relative strength index (RSI) when swing trading futures

The RSI, developed by J. Welles Wilder, measures the strength and speed of price momentum over a period of bars. It’s calculated by comparing the magnitude of recent gains versus losses to determine overbought or oversold conditions, which can then identify turning points at the end of a trend. (Figure 4)

  • Reading greater than 70 = overbought
  • Reading under 30 = oversold

Swing traders can also look for divergence between RSI and the price of the future. For example, if the futures price is making a new “lower” low, but the RSI is flat or making a new “higher” low, then a divergence occurs, signaling a weakening trend and the potential for a reversal.

Figure 4: Relative Strength Index (RSI) looking for overbought and oversold patterns.

5. Swing trade futures using average directional movement index (ADX)

ADX is another J. Welles Wilder study and is a derivative of his directional movement index (DMI) indicator. The ADX measures the strength of the current trend by comparing the magnitude of up versus down moves over a given period. It’s important to note here that ADX does not identify the trend direction — only the strength of the price trend, whether it is up or down. (Figure 5)

An ADX value above 25 indicates a trend, and the slope of the ADX indicates whether the trend strength is increasing or decreasing. Swing traders often use ADX to help determine if the trend will continue, stall, or swing the other way. When ADX is above 25, the current trend should continue; if it falls below 25, we might expect the trend to stall and possibly reverse. It’s also good practice to use other indicators like the ones mentioned in this article to confirm and support the ADX analysis. Learn more about using trend direction and strength indicators like the ADX

Figure 5: Average Directional Index (ADX) for identifying strengthening and weakening trends.

Bonus tool for swing trading futures: multiple time frame analysis

The practice of multiple time frame analysis is crucial for futures swing traders as it provides a more comprehensive, macro view of the market by examining price action through the lens of multiple bar intervals. By looking at bar intervals historically — ranging from shorter durations like minutes or hours to longer-term periods such as days, weeks, or even months — futures traders can gain greater insights into price action, larger market trends, key price levels, and trader sentiment.

Read “5 Key Indicators for Day Trading Futures to learn about multiple time frame analysis and other indicators.

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This article was originally published on NinjaTrader.com: https://ninjatrader.com/futures/blogs/5-essential-tools-for-swing-trading-futures/




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