Swing high examples
Swing highs can happen in any market you trade. Here, we cover a stock and forex example.
Stock market swing high
Imagine a technology stock that’s been in an uptrend for several weeks. The stock’s share price rises from $100 to $120 over three weeks, then experiences a short pullback to $115. It then resumes its upward movement, reaching $130 before pulling back again to $125. This $130-point represents a swing high.
You’d identify this swing high by observing that it’s higher than the previous peak ($120) and the subsequent pullback ($125). This swing high at $130 could indicate a potential resistance level. If the price approached $130 again, you might expect the stock to face selling pressure (ie where there are more sellers than buyers). If, however, the price broke above the $130 level, this could signal that the uptrend was going to continue.
Forex market swing high
Consider the EUR/USD currency pair. Over a month, the pair rises from 1.1000 to 1.1200, then pulls back to 1.1150. It then climbs to 1.1300 before declining to 1.1250. The 1.1300 level represents a swing high.
You’d note this swing high as it’s higher than both the previous peak (1.1200) and the following trough (1.1250). This 1.1300 level could become a key resistance point. You might use this information in several ways:
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As a potential ‘sell’ point if you believe the uptrend is weakening
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As a level to watch for a breakout, which could indicate a stronger uptrend
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To set stop-loss orders just above this level when taking short positions
