Swing Trading Cryptocurrency: Is it beneficial for traders?

What is Swing Trading?

The swing trading technique is one of the most common approaches used in forex, stocks, and cryptocurrency markets. Market swings of price movements can be captured as a result of this strategy. Traders can take advantage of higher or larger price swings by using swing trading in trending markets. 

Trading involves capturing the short- to medium-term price movement within a range. Day traders typically hold positions for one month, while swing traders typically use one-hour or four-hour charts to determine tops and bottoms. 

Technical analysis is primarily used by swing traders to identify trading opportunities – but not as extensively as day traders. 

Traders pay attention to two swings:

• Swing highs – In a market that peaks before pulling back, an opportunity for shorting exists
• Swing lows – An opportunity to make a long trade arises when the market dips and bounces

Advantages and disadvantages of swing trading

Swing trading typically involves relatively tight stop losses – especially when compared with buy-and-hold strategies. Since swing traders are unlikely to hold if the trade fails, they can choose to open a larger position or add leverage. 

Price fluctuations can profit from both when prices increase during a bullish trend and when prices decrease during a bearish trend. Furthermore, swing trading is easier on the traders than day trading because they do not need to monitor charts all day. The cost of swing trading is less expensive as well since swing traders place their orders less frequently.

Swing traders are at risk of overnight risks, as well as thinner order books during weekend hours – especially in cryptocurrency markets, which are open 24/7. As price usually breaks through trading ranges, swing traders are unable to grasp a market that never closes, causing the original technical pattern to become invalidated. 

 Is swing trading profitable?

In swing trading, traders are looking to capture price swings that occur over a short time. The swing trader holds positions for a longer time than an investor who buys and holds but for a shorter period than a day trader.

Trading ideas are typically derived from technical analysis by swing traders, albeit not to the same extent as they would for day traders. In swing trading, fundamental analysis can also be useful as fundamental events can unfold over several weeks. 

 To evaluate trade setups, price action, candlestick chart patterns, resistance, and support levels, and technical indicators are very common. Moving averages, Relative Strength Indexes (RSI), Bollinger Bands, and Fibonacci retracement tools are among swing traders’ favorite indicators.

Charts with medium- and high-time frames are often viewed by swing traders. What is the reason? There has to be a higher timeframe confirmation of a strong uptrend or downtrend. To look for entry and exit points, they may also check intraday charts, such as the 1-hour, 4-hour, and 12-hour time frames. Depending upon the time frame, these triggers may include a breakdown or a pullback. 

Although, swing trading is likely to be most successful when viewed on a daily chart. The strategies of different traders can vary significantly, however.

Beginner’s tips for swing trading

Getting started with swing trading is easier than you think. Here are some tips:

• Choose the best cryptocurrency to trade

On CoinMarketCap, we can see that there are more than 7,000 cryptocurrencies currently available. Thousands of coins are available for trade, so you can pick what you like. Nevertheless, how do you know which coin is best for you?

 The most prominent cryptocurrencies are considered the best choices in swing trading. For example, Bitcoin (BTC), Ethereum (ETH), and Tether (USDT) are often the most actively traded coins on cryptocurrency exchanges.

The price of these coins swings extremely high or low during active markets. By taking the opposite side of the trade when the price swings the other way, they make the most out of these volatile cryptocurrencies.

• Choose a trustworthy crypto exchange

Select an online exchange or marketplace that is trustworthy and secure after carefully selecting the cryptocurrency to use. To make the best decision, you need to look over its security features, the number of users, trading volume, transaction fees, and other important information. This will give you an idea of whether a platform fits your trading needs.

• Pick the right time

In light of cryptocurrencies’ unpredictable prices, traders should be careful and wary of choosing the right time to trade them. Crypto markets are characterized by tremendous volatility, so it’s difficult to predict future movements. Even if a crypto’s price is soaring today, nobody can be certain if the momentum will continue in the hours, days, or even weeks to come. This “waiting period” allows swing traders to catch more opportunities for short-term and long-term ups and downs.

• Stay up to date with cryptocurrency news and market trends

The advent of cryptocurrencies and the use of trading approaches are both evolving, just like other innovations and business strategies. Thus, staying current on the latest crypto-related trends and reports is important. You should never stop learning! In the years to come, this could help you become more proficient in trading.