Swing trading is a commonly used trading strategy that may be ideal for novice traders. It is a relatively convenient way to express your opinion on the market due to its manageable time span. Swing traders operate in most financial markets such as forex, stocks, and cryptocurrencies. But is this model the right strategy for you? Should you start day trading or swing trading?
This article explains well what you need to know about swing trading cryptocurrency and helps you decide if it is the right choice for you.
What is swing trading?
Swing trading is a trading strategy that seeks to capture price movements that occur in the short to medium term. The idea behind swing trading is to capture market swings that take place over days to weeks.
Swings trading strategies work best in trending markets. If there is a strong trend in higher timeframes, swing trading opportunities can be increased and swing traders can take advantage of larger price movements. Conversely, swing trading can be more difficult in integrated markets. After all, if the market is sideways, it will be harder to catch large price movements.
How do swing traders make money?
As mentioned earlier, swing traders aim to capture price movements that occur from days to weeks. Thus, swing traders hold positions for more time than day traders, but less than buy or hold investors.
Swing traders typically use technical analysis to generate trading ideas, but not necessarily to the same extent as daily traders. As fundamental events can span several weeks, swing traders can also use fundamental analysis in their trading framework.
Nevertheless, price action, candlestick chart patterns, support and resistance levels, and technical indicators are very commonly used to identify trading settings. The most common indicators used by swing traders are the Moving Average, Relative Strength Index (RSI), Bollinger Bands, and the Fibonacci Retracement Tool.
Swing traders usually see mid to high time frame charts. why? A strong uptrend or downtrend should be confirmed at higher times. However, you can also view intra-day timeframes such as 1-hour, 4-hour, and 12-hour charts to find specific entry and exit points. For example, these triggers could be breakouts or withdrawals for a lower time frame.
However, the most important timeframe for swing trading is likely the daily chart. Nevertheless, trading and investment strategies can vary significantly from trader to trader. What has been discussed here is only a general example, not a strict rule.
What is the difference between day trading vs swing trading?
Day traders aim to take advantage of short-term price movements while swing traders look for larger movements. In effect, day trading is a more aggressive strategy that requires traders to monitor the market frequently and does not keep positions open for more than one day.
Conversely, swing traders can take a more passive approach. They can monitor their positions less often as their goal is to profit from longer-lasting price movements. Because these moves tend to be larger, swing traders can make significant returns on even a few winning trades.
Day traders use technical analysis almost exclusively. Swing traders typically use a combination of technical analysis and fundamental analysis, with a generally more technical focus. At the other end of the spectrum, investors can only invest in fundamentals without considering the technology at all.
Which is better, day trading or swing trading? Well, where do you see yourself in a spectrum of smaller to larger time frames, skills and foundations? Answering these questions will help you find the trading strategy that best suits your personality, trading style, and investment goals.
You can consider what your strengths are and choose the trading style that best showcases those strengths. Some people prefer to get in and out of positions quickly and don’t have to worry about open positions when they fall asleep. Others make better decisions when they have more time to consider all possible outcomes and refine their trading plans.
Naturally, you can switch to a different strategy to see which one gives the best results. You can even make paper trades (i.e. trade with fake money) before implementing the strategy into your real trading plan.
How to start swing trading cryptocurrency
Swing trading can be an ideal way to start trading. why? The longer period (not too long yet) allows you to make decisions calmly and easily monitor your trades.
If you are not completely familiar with trading, you can check out our complete guide to cryptocurrency trading for beginners. This article explains what you need to know about trading, along with some tips to help you find your trading style. If you are familiar with the knowledge, you can try paper trading on the Binance Futures testnet. This way you can test your swing trading skills without putting real money at risk.
So, when you feel ready, you can start trading on cryptocurrency exchanges. What is the best online trading platform for swing trading cryptocurrencies? Well, multiple options are available, but the Binance ecosystem offers hundreds of market pairs, quarterly and perpetual futures, margin trading, leveraged tokens, and more. Many of these instruments are ideal for swing trading opportunities.
Swings trading is a commonly used trading strategy in the stock market, and the same is true of cryptocurrencies. Swing traders typically hold positions for days or weeks, depending on their individual trading setup.
Should you start swing trading or day trading? The easiest way to find out is to try both and see which one suits your trading style best. Before you start, it can also be helpful to learn about risk management principles such as stop loss and how to properly size your position.