The swing index uses the current and past prices to determine the market direction and change in direction. It gives a numerical value that is between +100 and -100. This indicator is primarily used in the commodity and Forex markets, but it can also be applied to stocks.
The formula includes a variable known as 'value of a limit move', which is used to define the correct limit move for the commodity you are analyzing. This variable is the unique parameter of the 'swing index' function.
The value could be set as follows:
T-Bonds: 3$
Gold: 0.1$
Coffee: 0.06$
Heating oil: 0.04$
Hogs: 0.015$
Soybeans: 0.30$
The above values need to be adjusted based on the position of the decimal in your quotes data.
The 'value of a limit move' can also be defined as 'the maximum price changing during trade session' and thus can be calculated dynamically as the moving average of the difference between high and low prices for the last X bars.
The swing signal could be interpreted as follows: when the signal crosses below 0, it indicates a fall in the security market price. Conversely, when the swing index signal crosses above 0, it indicates a rise in the security market price.
The swing index is mainly used as a part of the Accumulation Swing Index.
