Swing Trading In Crypto- Understand The Basics!

What would you do if you are not patient enough to be a long-term investor and also don’t want to risk it all by day trading?

Is there a third option where you can still be a trader? Actually, yes, there is. It’s called swing trading, and you are going to learn all about it right here, reading this article.

What is Swing Trading?

Swing Trading

Swing trading is a trading strategy that lies in between day trading and position trading. Unlike the other two, it targets short-to-medium-term gains in the cryptocurrency market focusing on price fluctuations within a specific trading range.

Basically, the strategy involves making profits from small price movements by identifying these oscillations that occur over a comparatively short span, rather than relying on long-term trends.

The span referred ranges from a few days to a few weeks, and at times, a few months.

However long you may choose to go, there are certain things you need to consider and keep in mind before adopting the strategy. Let’s discuss them next.

Swing Trading Strategies

Swing trading in crypto is not as simple as it might sound. It requires some research and planning beforehand so that you won’t end up losing all your assets in the game.

Technical analysis

Since the whole strategy depends on the predicted price swings over a certain period, it demands the analysis of the historical data.

This is used to create price charts and indicators which in turn will help in trend analysis and in identifying entry and exit points for trades.

Moving averages and momentum indicators are some of the measures that can be used for this purpose.

Fibonacci retracements

The Fibonacci sequence is an interesting series of numbers in mathematics. Swing trading involves the practical application of this sequence to identify the potential levels of support and resistance in the market.

The sequence, when applied to the price chart, identifies the levels at which a retracement of price occurs, in either direction.

Support & resistance triggers

Both technical analysis and Fibonacci retracement identify support and resistance using historical data.

Once identified, traders use this information to buy the asset near the support level and sell it near the resistance level to make a profitable transaction.

Time frame

This is the ‘luck factor’ in the whole process. Although you can turn it in your favor by staying updated about the major changes and developments in the industry, it doesn’t always help.

All you can do is do a thorough analysis of the available data, decide on a time frame, and be optimistic about your chances.

Swing Trading vs Day Trading

Swing Trading

While day traders close the trades at the end of the day, swing trading involves an overnight hold of positions at the least.

Day trading demands constant monitoring throughout the day and has less time for decision-making compared to Swing trading. It also involves higher risk as well as higher cumulative transaction fees.

Swing traders, although make significant gains on a single trade, might not be as high as the cumulative gains of day traders. It involves comparatively complex strategies and broader market research.

However, swing trading stays more flexible than day trading with less time commitment which lets the traders be involved in activities outside of trading.

Swing Trading vs HODling

HODling, or position trading, refers to long-term investment in the crypto market. Unlike day trading, position trading doesn’t promise a quick profit.

It is less stressful compared to swing trading since it doesn’t require constant market analysis but a general understanding of the asset you invest in as well as of the market.

Position traders usually invest in assets betting on their growth in the long term. When the assets grow in price, significantly over a period of time, probably years, they will cash it out.

With swing trading, traders will have a diversified portfolio, diverting their capital to other assets.

The Bottom Line

To sum up, swing trading is the kind of trading that involves analytical skills, risk management skills, discipline, and comparatively quick decision-making skills.

It is not suitable for everyone but for those who are interested in taking a more active approach toward trading and, at the same time do not prefer to make it a full-time job.

The rest is up to your judgment and the trust that you will make the right decision.

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