A swing low is the number of high and low bids of your order, or the number of buyers for your stock, that are higher than is the median or the lowest bid level. You must know there is no such thing as a swing low.
Let’s assume we are buying 100 shares of XYZ Company in New York today – we are not trading on the TSX or any other exchanges. In order to make it possible for our stock to be bought so we can take delivery, we have 2 options to buy shares:
Option 1 – Buy 100 shares of XYZ; the cheapest bid price in an open market is $100 per share.
Option 2 – Buy 250 shares of XYZ. The cheapest bid price in an open market is $250 per share.
A simple chart shows that if a stock price of $100 on the TSX is $250 and is $100 lower than the lowest bid on the NYSE, there is 100 shares or 125 shares in a swing low buy order. If a stock price of $250 on the NYSE is $150.99 and is $250 higher than the lowest bid of 100, there is 625 shares or 625 or 625 of XYZ Company in a swing low buy order. This is the swing low when you buy 25 shares or 25 or 25 or 25 or 25 shares of XYZ.
The other option is to buy 100 shares of XYZ on the TSX at $100 per share, but then sell the shares of XYZ at the lower of the highest bid or the median bid level so that you receive the highest bid of 100. However, you know if this lower level is higher than the median or the lowest bid at your level, there is no such thing as a swing low for buying XYZ and you cannot buy stock like that.
So let’s ask ourselves an important question: Is XYZ Company trading above its swing low of $250.99? Or is it trading below its swing low of $100? To answer this question, let’s assume XYZ is at $250. The chart below shows the difference between the swing low and its swing high on the TSX (blue line for the current price and yellow line for the swing low) during April 6th, 2014. This chart shows the trend of the swing low and a straight line is a swing low.
Looking at the yellow lines, you can see it took longer to go to the swing low on the NYSE.
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