Is swing trading crypto right for you?
The more algorithms you use when trading crypto, the higher your chance of success. In this article, we will review what is swing trading crypto and how to make money on it.
Swing trading is often the starting point for those who want to begin trading on the exchange and become active traders. It is a convenient medium-term trade that can complement other trading styles, such as:
- Day trading.
- Trend-following trading.
This style of trading is based on the use of value changes, as well as all trading strategies. But its peculiarity is that the position is held open for some time - from a few hours up to a week.
Swing trading crypto is one of the few trading approaches that are suitable for the ordinary person who is busy all day at work. It only requires spending some of his time in front of the monitor, but it provides enough opportunities to make stable profits from the market.
What is swing trading in crypto?
Before answering the question "How to swing trade cryptocurrency?", let us understand what makes the market swing and what are the best indicators for swing trading crypto. This requires a little bit of diving into theory.
The price of any crypto is the balance between supply and demand at a particular moment in time. It is the price at which the buyer and seller agree to make a transaction. Over time, these prices can rise or fall, or move sideways within a certain range.
A typical market tendency is for prices to move from a contraction range to an expansion range. The gap between the two is called a "breakout," and this is where we see strong and rapid price movements on the charts.
One way to see this mechanism is to compare it to a spring. A breakout occurs when all the energy of the spring is released, which can happen either up or down. If this breakout is followed by a series of higher peaks and increases in "wave movement", the market has formed an uptrend. If the opposite is true, we have a downward trend. Each wave is treated as an individual swing in the market.
The job of swing traders is to catch the strongest part of that movement. Some traders prefer to hold a trade on a few swings and thus follow the trend. Others prefer to sell after reaching a predetermined target.
Simply put, swing traders determine a possible price trend and then hold a particular asset in an attempt to make a profit. The main goal of swing trading is to make the most profit with a small number of deals.
Advantages and Disadvantages of Swing Trading
While a swing trader can make a significant profit from a swing, he equally carries just as much risk that it will result in a loss. A swing trader uses high volatility to take higher risks with higher profits.
Advantages of swing trading:
- It does not require a lot of time.
- You can get started with a smaller investment.
- It does not require a high level of knowledge.
- Large profits per the deal.
Disadvantages of swing trading:
- Night risks.
- Requires a patient approach to trading.
- Time to market can be difficult.
- Chances of large losses on individual deals.
Obviously, crypto swing trading has its pros and cons. This is the reason why most traders use and combine several trading styles without giving preference to only one particular style.
Crypto swing trading strategies
How to make money swing trading crypto? There are several different strategies often used by traders. Here are four of the most popular: breakout, breakdown, reversal, and correction. These strategies work for all cryptocurrencies, so if you are looking for a swing trading strategy Bitcoin, you can choose one of the four below.
The breakout technique is an approach in which the trader takes a position early in an uptrend, looking for the cryptocurrency that is most likely to "breakout." The trader enters the trade as soon as he sees the desired level of volatility and movement of the coin, which overcomes a resistance line.
A breakdown strategy is the opposite of a breakout. The price of the cryptocurrency goes below a certain support level and the chart indicates the price decline. Traders then watch for the same fundamental signs and wait for the right moment to enter the market.
This method takes advantage of the momentum of a price change when its rise or fall slows to a complete reversal. This method has a good risk-to-reward balance and works best in changing markets.
A concept that is very similar to a reversal. A retracement is applied when the price reverses within a larger trend, but not to its highest value or within any time frame. The cryptocurrency temporarily returns to an earlier price level and then continues to move in the same direction.
The difference between day trading and swing trading
Swing trading is often compared to day trading because both approaches seek to profit from short-term changes in cryptocurrency prices. However, there is a significant difference between them, which we will now explain.
The first significant difference between the two trading methods is the holding period. A day trader can hold a deal from a couple of minutes to several hours. However, this limit should never cross the opening and closing times of the market.
A swing trader, on the other hand, depends on the period of a trend or fluctuation. They may have to hold their positions from a few hours to a few weeks.
Number of deals
The next difference is the number of individual trades. Day trading works on the principle of "the more the better," where smaller trades make up the required profit.
Swing trading, on the other hand, relies on a few volume trades to make up the difference.
In the case of day trading, you may face higher transaction fees in general and a greater need for monitoring. However, in this case, you are much less likely to be exposed to significant risk from trading on fluctuations.
Of course, day trading is a full-time job that requires constant analysis, monitoring, placing trades, etc.
In contrast, swing trading cryptocurrency is more flexible in terms of time commitments. It can often require as little as an hour a day. The rest of the time can be spent passively holding a position and waiting for a sell-off.
Additionally, if you use auto crypto trading, the amount of free time can be even greater. For example, a swing trading crypto bot will take over your job of opening and closing deals.
Is Swing Trading Right for You?
Finding the best trading style for you depends on your personality as well as your trading preferences.
Using swing trading, you will hold your deals for days or even weeks. Naturally, the risks in this case increase.
You will not have many trading opportunities and the number of your deals will be limited. On average, you can expect between 10 and 15 trades a month. However, the returns from these trades can be much higher than in intraday trading.
When would swing trading suit you?
You do not mind holding positions for several days
Most swing trades last from a few days to a few weeks. This means holding positions overnight and sometimes over the weekend.
Of course, there are several ways to manage your risk that will allow you to hold positions for longer periods. One way is to simply close your position before the weekend if you know the market may be volatile.
You want more freedom
On average, you won't need more than 30 or 40 minutes to review your charts throughout the day. Spending more time is not necessary.
You do not mind taking fewer trades but earn more on each of them
Since swing trading works best on higher time frames, your opportunities for frequent trades are limited. You can get five to ten good trades each month.
The returns from them can be much higher than those who trade intraday.
You're looking for a more measured trading style
When it comes to trading, slow trading is not a bad thing. In fact, a slower style gives you more time to make decisions, which leads to less stress and anxiety. If you're looking for a more relaxed way to trade the market, such trading may be the solution for you.
Do you have a job or study
This is the kind of freedom in trading that such trading can give you. You can mind your own business without devoting all your free time to the market. To minimize the time you spend on work, try the copy trading crypto strategy, which allows you to copy deals of professional traders and get the same results as they do.
When will such trading not work for you?
You like active trading and don't want to wait.
When it comes to swing trade, calm and disciplined traders win. If you like to make more deals and you're bored of waiting around for days, then this trading style is definitely not for you.
You like to take frequent profits from the market
Day trader can make a lot of trades throughout the day, but their profit will not be as great as swing trading.
You don't like the idea of carrying a position overnight
If you can't sleep knowing that you have your money left in the market, it's time to reduce your trade size or leave swing trading.
You want to know if you are right or wrong immediately
Long-term trades require patience. It can take days, and sometimes weeks before you realize that your analysis was correct. During this time, you will have to show restraint and not close your trade ahead of schedule.
You get too worried when the price goes against you
In most cases, the price will not immediately move in the direction you choose. All traders face drawdown in one form or another, regardless of their trading style. Sagging for a swing trader, however, can last much longer.
Now you know what swing trading is and can answer the question "How to swing trade Bitcoin?" It is necessary to remember that such trading is not suitable for inexperienced beginners. At first, you need to gain basic knowledge, learn how to identify trends and calculate, and control risks. But if the trader is ready to spend time studying all the intricacies of swing trading and try to control his emotions, this style of trading will bring him a good income.