Swing Index

Last Updated July 18th, 2012

Overview


Developed by Welles Wilder, the Swing Index seeks to isolate the "real" price of a security by comparing the relationships between the current prices (i.e., open, high, low, and close) and the previous period's prices.

Interpretation


The Swing Index is primarily used as a component of the Accumulation Swing Index.

Example


The following chart shows the British Pound and the Swing Index.

Swing Index

You can see that by itself, the Swing Index is an erratic plot. The value of this indicator develops when it is accumulated into the Accumulation Swing Index.

Calculation


Although it is beyond the scope of this book to completely define the Swing Index, the basic formula is shown below. Step-by-step instructions on calculating the Swing Index are provided in Wilder's book, New Concepts In Technical Trading Systems.

Swing Index (Formula)

Where:

Swing Index (Formula)

The following table lists the limit moves for several commodities. You can get a list of limit moves from your broker.

Table 14
Coffee       $ 0.060
Gold         $75.000
Heating Oil  $ 0.040
Hogs         $ 0.015
Soybeans     $ 0.300
T-Bonds      $ 3.000

You may need to adjust the limit moves shown in the above table based on the position of the decimal in your data. For example, if the price of corn is quoted as $2.45, the limit move would be $0.10. However, if the price of corn is quoted as $245.00, the limit move would be $10.00.

If the security does not have a limit move (e.g., a stock or some futures), use an extremely high value (e.g., $30,000).

 

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