Introduction
Swing trading is a common trading strategy that can be ideal for new traders. It allows you to slowly assess changes in the market thanks to a relatively long time frame. Swing traders operate in most financial markets, such as the stock markets, Forex and cryptocurrency markets. But is a swing trading strategy right for you? So what should you choose: day trading or swing trading?
In this article we will talk about all the nuances of swing trading with cryptocurrency and try to answer the questions above.
What is swing trading?
Swing trading is a trading strategy that involves trying to track price movements over short to medium time frames. The idea behind this strategy is to catch changes in the market that last for several days or weeks.
Swing trading strategies work best during a trend. A powerful trend and price fluctuations over a long time period open up various opportunities for swing trading, which traders take advantage of. In contrast, in a consolidating market, swing trading can be quite difficult. If the market is moving sideways, it is not so easy to catch large price changes.
How swing traders make money
Swing traders try to catch price fluctuations and hold a position for a few days or a few weeks. Thus, the time range of swing traders is much larger than that of day traders, but smaller than that of hodlers.
Swing traders use technical analysis to generate trading ideas, but not to the same extent as day traders. Since fundamental events can affect markets over a period of weeks, swing traders can also use fundamental analysis in their strategies.
They often use price movement, candlestick charts, support and resistance levels, and technical indicators to determine trading positions. The most common indicators used by swing traders include moving averages, relative strength index (RSI), Bollinger Bands, and Fibonacci Bands.
Swing traders typically rely on medium to long-term charts because strong uptrends or downtrends need to be confirmed over a longer period of time. However, they can also use intraday charts such as the hourly, 4-hour or 12-hour chart to determine entry and exit points. These points could be, for example, a breakout or a rollback over a shorter period of time.
If we decide to highlight the most important period of time for swing trading, it will be the daily chart. Even with the above in mind, trading and investment strategies may vary significantly between traders. Please note that these are not hard and fast rules, just common examples.
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Difference between day trading and swing trading
Day traders seek to benefit from short-term price movements, while swing traders are interested in larger changes. Day trading is a more active strategy that requires traders to monitor the market and not leave positions open for more than one day.
Swing traders, on the other hand, take a more passive approach. They may monitor their positions less frequently because their goal is to profit from price movements over the long term. Because these are usually fairly large movements, swing traders can make large profits from even just a couple of successful trades.
Day traders primarily use technical analysis. Swing traders, on the other hand, typically use a combination of technical and fundamental analysis with an emphasis on technical aspects. Investors may not consider technical factors at all and invest only based on fundamentals.
What should you choose in the end: swing trading or day trading? To get started, make a choice between a shorter or longer period of time, as well as technical or fundamental analysis. This will help you decide on a trading strategy that will best suit your trading style and investment goals.
Analyze your strengths and choose the trading style that is most effective for you. Some traders tend to quickly open and close positions to save themselves from worrying about open positions at night while they sleep. Others prefer to have enough time to think and develop a trading strategy.
With this, you will be able to freely switch between different strategies to get the best results. Consider paper trading (i.e. trading with fake money) before actually implementing the strategies into your plan.
How to start swing trading cryptocurrencies
Swing trading is a great option for new traders. Longer time periods (but not too long) allow you to calmly monitor trades and carefully consider decisions.
If you're new to this space, be sure to check out The Ultimate Guide to Cryptocurrency Trading for Beginners. There you will find the most important information about trading and tips for finding your style. If you are confident in your knowledge and understanding of the basic concepts, then you can try paper trading on the Binance Futures testnet. This way you can test your swing trading skills without risking real money.
Once you are confident in your abilities, you can trade freely on a cryptocurrency exchange. But how do you choose a cryptocurrency swing trading platform? There are many different options. For example, the Binance ecosystem offers hundreds of trading pairs, quarterly and perpetual futures, margin trading, leveraged tokens, and other useful tools. Many of these products are ideal for swing trading.
Summary
Swing trading is a common strategy for trading stocks and cryptocurrencies. Swing traders typically hold positions for several days or weeks, depending on the individual plan.
What to choose: swing trading or day trading? To answer this question, the easiest way is to try both strategies and decide which one works best for you. Before you start trading, learn the principles of risk management, such as the use of stop losses and techniques for properly sizing positions.