The prospects of making money from the volatility of cryptocurrencies attract millions of new traders every month. However, 90% of people lose money due to lack of knowledge regarding trading strategies. The remaining 10% study the market’s moves closely and decide accordingly whether they will resort to scalping, day trading, swing trading or long-term investment. Every trading strategy has its own pros and cons. A beginner may like one strategy for its rewards, but it may not suit his capital or his knowledge and experience. Swing trading offers the best intermediate approach: it is neither too hasty and rash as scalping, nor too tedious and frustrating as long-term investment.
What Swing Trading Is
As it is evident from the very term, swing trading means taking the utmost advantage out the swinging moves of the cryptocurrency market. Any class of asset on a blockchain has two aspects that an analyst or a trader can take into account: fundamentals and technicals. The fundamental aspects include the real-word usage of the token, including partnerships with business entities.
Technicals means the study of ups and downs on a price chart and the resulting patterns like head-and-shoulder pattern, inverted hammer, cup-and-handle pattern, etc. Besides, moving average (MA), exponential moving average (EMA), relative strength index (RSI) and Fibonacci Retracement serve as guidelines for the traders on the technical front. Swing trading needs a fair amount of knowledge of these indicators.
How Swing Trading Works
Swing traders focus the trends of a cryptocurrency on various time frames, preferably 1D TF. They keep a close eye on whether a coin is following a bullish or a bearish trend. The idea is to make the most of the swings of the price action. Larger time frames are used to confirm the uptrend or downtrend whereas shorter time frames are employed to decide the entry and exit points. Moreover, fundamentals may also play a significant role as the position goes on for weeks.
For example, if a cut in interest rates is on the horizon in the coming days, the market may show extra volatility. The swing traders take positions by taking into account all these aspects.
How Swing Trading is Different from Day Trading
Swing trading is different from day trading as the former is based on medium to large time frames. It’s quite obvious that only low time frames, such as 1H, 4H, etc. are considered for day trades. On the other hand, since swing trading position may go on for many days, and sometimes even weeks, weekly time frames may also come into play. In addition, day trading needs far more funds than day trading requires because short-term positions may yield small percentage of profits. A small percentage of small capital is nearly negligible when seen in terms of profit. Swing trading may be more rewarding because it utilizes the full move of a price action.
Another difference lies in traders’ being active and passive. Swing trading is different from Day Trading in that in the latter strategy, traders remain active and tense after opening a long or short position until they close it. On the other hand, swing traders do not need to monitor the market continuously. The targeted moves may take time to play out fully. Also, the role of fundamentals gives a hedge to the traders if there are any weaknesses in technical terms.
Bottom Line
In short, swing trading implies extracting maximum advantage from short to medium-term price action as well as from macro and fundamental economic factors. It is different from day trading in terms of utilization of daily and weekly candles on charts and yielding better profits for small to medium-capital traders. But swing trading is only useful in the market where there is a clear upward or downward trend. Consolidating markets will not show any substantial price action, hampering the profit-making process. Furthermore, any news or event may turn all the trend topsy-turvy and traders may end up losing money very quickly.
An Example of Swing Trading
Suppose $SOL is observed reaching a resistance level of $170. Ascending Triangle pattern can be seen on 1D time frame. If Solana goes past the level with good volume and RSI is not in overbought territory (it is under 75), take position after one or two confirmations by 4H candles. Set the stop loss (SL) at $155 and set the take-profit (TP) value at $230. Leave the trade and it will probably meet your expectations in a few days or weeks. Avoid high leverage as market makers generally hunt for high-leveraged positions aggressively. Risk management is key to safe trading.
Look First, Then Leap
Yet, despite all the knowledge about swing trading, traders have to go through rigorous rehearsal of trading through demo trading or paper trading in which they don’t use the real money to take risks. This process enlightens a trader about his strengths and weaknesses without depriving him of the hard-earned money. Only when sufficient experience is acquired should a trader jump into an exchange along with real money.
Frequently Asked Questions
What is cryptocurrency swing trading?
Swing trading involves holding crypto positions for days or weeks to profit from medium-term price swings, using both technical and fundamental analysis.
How is swing trading different from day trading?
Unlike day trading, which focuses on short-term moves within a single day, swing trading uses longer timeframes (1D or weekly) and requires less constant market monitoring.
What tools do swing traders use?
Traders rely on indicators like RSI, MA, EMA, and chart patterns such as ascending triangles and cup-and-handle to spot entry and exit points.
