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Swing trading is a commonly used trading strategy that is perfect for those who are just starting with their trading experience. This strategy is highly used in the cryptocurrency space and in today’s article we are going to have a look at the idea of cryptocurrency swing trading and the strategies associated with it.
What Is Cryptocurrency Swing Trading?
Cryptocurrency swing trading is a type of trading strategy that associates trying to capture the price shifts that occur in a medium to a short period of time. The concept behind swing trading is to grab the market “swings” that play out after a few days to numerous weeks.
The swing trading strategies cryptocurrencies operate ideal in trending industries. There are primarily two swings that traders often look for:
- Swing Highs: When the market is at its peak before pulling back, offering a chance for a short trade.
- Swing Lows: When the market bounces and dips, offering a chance for a long trade.
The strategies of swing trading operate effectively with trending industries that include stock, forex, and the crypto market. The best crypto for swing trading, mainly if you are a starter, includes Ethereum, Bitcoin, and Cardano. This is because these coins carry the largest market cap and are among the most actively traded and fluctuating coins in the sector.
Successful cryptocurrency swing traders primarily use technical analysis to look at short to medium time span charts for catching weekly and even daily trends. This use of fundamental analysis is also important, as economic occurrences can take place often over weeks or even days.
Cryptocurrency Day Trading Vs Cryptocurrency Swing Trading
The primary difference between day trading and swing trading in cryptocurrency is the timescale. Day traders try to earn profit from short term price shifts within the span of a day. As an outcome, they are more active in comparison to swing traders and typically do not leave their stand open for more than a day.
There is also huge pressure on technical analysis in the case of day trading, whereas, crypto swing trading tends to aim at the fundamentals heavily. In fact, there are some crypto investors who may make their analysis completely of fundamental events.
Planning between swing trading and day trading in crypto is completely dependent on the individual investing goal and style. While there are some traders aiming to carry forward all their trades at the time of the day, others are not phased by the idea of holding crypto overnight. Along with that, some traders may try in high pressure space, while others aim to take a more passive attempt.
Either way, it is an ideal idea to try out varied strategies within a demo account, prior to rolling it into your trading plan.
Cryptocurrency Swing Trading Strategies
There is a spectrum of attempts that can be implemented when doing cryptocurrency swing trading even though it will take some time for determining which one is ideal for your preferences. We have offered two famous strategies below.
‘Stuck In A Box’
This crypto swing trading strategy goes by a market range by using resistance and support levels. The industry is hence at times known as staying stuck in a box between the two lines above and below.
Once the value breaks below support, the trader waits for an evident price rejection and then moves on the next candle open. TThe focus is to crucially exit the trade prior to the selling pressure that arrives at resistance.
To assure success that arrives with this strategy, you will require to have a good knowledge of your regular candlesticks support and chart and also resistance levels. Your take profit and stop loss will also be important in assuring you do not exceed these levels.
‘Catch The Wave’
As the phrase implies, the primary aim of this strategy is to catch one shift in a trending industry, whereby you get after the completion of the pullback. For catching the wave, traders understand a trend that is in relation to for instance, a 50 period shifting average. If the BTC market approaches the sifting average, the traders will have to wait for a price rejection that is bullish in nature.
As an effective thumb rule, one should set their stop loss below the candle low and also set the take profit before the market swings high.
Cryptocurrency Swing Trading Tools
Whether you are trading Bitcoin or any other altcoins, various trading tools can prominently improve your cryptocurrency swing trading strategy and assure peace of mind when the things turn challenging.
Social And Copy Trading
If you are starting out with cryptocurrency trading and are interested to see what swing crypto trading actually is and its actions, you could search for brokers that provide copy trading. This enables you to share trading concepts and copy other prominent deals, creating a perfect feature for traders who are still searching their feet.
You can also look for copy trading brokers who have mastered their strategy of swing trading within the exchange. eToro for instance, has one of the perfect copy and social trading and also best swing trade crypto platforms for beginners. This can be said to be the best crypto exchange for swing trading. You can also try swing trading on Coinbase for effective results. You are absolutely going to love the Coinbase swing trading.
Automation And Signals
Automated tools like crypto signals and bots can support you in implementing more trades quicker. Trading robots will scan the industry and will automatically purchase and sell assets at once to illustrate criteria that have been catered.
There are various types of robots to select from, they can cater to several swing trading strategies crypto. The user can also program bots to suit their own preference, depending on volume, orders, price, time, for instance.
Similarly, there are some platforms that provide a huge spectrum of signal providers, which can be handled either by another trader or can be completely automated. These can operate well with swing trading cryptocurrency strategies as they can function overnight when the phrases are still open.
Technical Analysis
Crypto swing traders typically focus on analyzing price action and candlestick chart patterns using resistance and support levels, Bollinger Bands, Relative Strength Index (RSI), Volume, Fibonacci Retracement, and shifting averages.
Technical tools support swing trader crypto in identifying the bearish and bullish zones within the chart where they can purchase and sell. Traders will hence aim to evaluate two forms of chances: breakouts and trends. Trends here are long term market shifts featured by short term collections. Breakouts mark the starting of a latest trend.
Shifting averages are generally the most famous tools that are used in swing trading. These measure the mean of the value shift of a crypto coin for a span of time. If any crossover in this span of time is found out, this can indicate a bearish or bullish momentum. You can also avail moving averages as your resistance and support levels.
Risk Tools
The golden rule or the thumb rule with any strategy of cryptocurrency swing trading is to not risk over the amount you can afford to lose. Once you enter in the trading business, the ideal way of mitigating your risk is setting stop loss parameters. Since this trading often needs grabbing positions overnight, stop loss must be applied to safeguard your funds while you are not sitting in front of your computer.
This assures that any losses do not fully wipe out your trading account and that you earn profit at a reasonable rate. The data offered here is to keep your losses small and handleable so that with time, they will be outnumbered by your profits.
Advantages And Disadvantages Of Cryptocurrency Swing Trading
Now that you know about cryptocurrency swing trading, it is important for you to know about the various benefits and drawbacks that this trading method brings with it. So now let us have a look at the pros and cons of performing swing trading in crypto.
Advantages
Swing trading can be a great strategy to master and is finally not as demanding as other cryptocurrency trading strategies. Along with that, you also enjoy other benefits as well. With that let us have a look at some of the pros of swing trading crypto.
Commitment To Time Is Not Much
While swing trading will keep you more busy in comparison to long term investing, in comparison to day trading, swing trading needs less time commitment. In case of crypto swing trading, you can perform your technical analysis mostly regularly, except the time when the trading setup is being created and you wish to step down to the 4 hourly time frame to choose a better price for entry.
Trading Can Be Done On Part Time
Owing to the type of swing trading and the notion that it does not take much time, you can mix it with 9-5 jobs as well and can develop a prominent cash flow.
This Type Of Trading Can Be Profitable
With an effective cryptocurrency swing trading strategy and effective risk management, this form of trading can be profitable without any added pressure. If you constantly execute your trading strategy, you can anticipate to make comparatively good returns from swing tradings.
It Does Not Tie Down Your Reserved Funds For Long
With cryptocurrency swing trading, you do not get to have your funds locked down in any bad crypto coin for a long time, unlike what occurs in the case of a long term trading. If a trade in case is not going fine, you suffer a small loss and move forward with your next trade.
Disadvantages
Despite the many advantages related to swing trading, it has some drawbacks which we will talk about now.
There Is Exposure To Overnight Price Holes
In swing trading crypto, trades remain open overnight and in some scenarios, for the long weekend. So they are exposed to weekend and also overnight price alterations. These losses can render the stop losses of a trader useless and that is not good.
There Is A Chance Of Missing exceptional Stocks
Swing trading focuses on earning profit from individual price movements. A trader tries to enter at the starting of a new swing, and comes out when the pullback begins. But while doing so, they may miss looking at greater stocks that would have earned more money if held on a long term investment.
Market Timing Is Difficult
Even the best crypto swing traders are aware that timing the market swings is very hard. If it is hard for the experienced traders, how will it be easier for the beginner traders?
Tips On Swing Trading Crypto
Before we end this article, here are some of the tips that you can execute in your trading strategy.
- If you are still wondering whether you should begin with swing trading or not, then we would recommend you to go with a demo account. First try your skill in this demo account and then start to swing trade on a full basis.
- Most of the altcoins are closely connected to Bitcoin. So it is important for you to closely look at Bitcoin as that will help you to get an idea about the market and other altcoins in the market for altcoin swing trading.
- You also need to look at the charges that are levied while you swing trade. Since crypto swing trade includes placing lesser trades for longer time spans, the spread is also charged less frequently and is normally smaller.
- Swing trading at times attracts novice traders who have no idea about this trading. So it is important for you to learn about swing trading, understand the way in which you can evaluate the market and then get into trading.
- Effective strategies of swing trading are constructed on proper analysis. So it is important that you learn the effective ways to analyze the market and then start to trade.
Final Words:
The allure of cryptocurrency swing trading in the digital currency market is largely because of its comparatively lower range of time commitment and pressure in relation to other types of trading. Having said that, new traders should take time to educate themselves on how to swing trade crypto assets and practice inside a demo account before starting with real trading. Also there are various best coins for swing trading. Once you have nailed the basics, you can then begin to determine which swing trading crypto strategies will ideally cater to your requirements.
Frequently Asked Questions On Cryptocurrency Swing Trading
1. Which crypto is best for swing trading?
The best crypto to swing trade, mainly if you are a starter, include Ethereum, Bitcoin, and Cardano. This is because these swing crypto carry the largest market cap and are among the most actively traded and fluctuating coins in the sector.
2. Is swing trading profitable crypto?
Yes, swing trading in crypto is profitable. Owing to the type of swing trading and the notion that it does not take much time, you can mix it with 9-5 jobs as well and can develop a prominent cash flow.
3. Can you make money swing trading?
As an effective thumb rule of crypto swing trade, one should set their stop loss below
the candle low and also set the take profit before the market swings high.
4. Is Day Trading Crypto Better Than Swing Trading Crypto?
This will vary depending on your individual risk profile and preference. Day trading is
effective for people who have the time to perform frequent daily trades, while swing
trading crypto operates better for those who choose to hold trades for a wider period
of time.
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