When it comes to crypto trading, the swing trading strategy is something even novice traders can’t go wrong with. However, is the method a suitable one for you? Read on to find out about crypto swing trading in detail, and you can decide for yourself whether or not it’s the right move for you.
What is Crypto Swing Trading?
Swing trading crypto, in its more common sense, is a form of speculative trading used by investors and traders across a wide range of markets and asset classes. In most cases, a trader will hang onto a tradable item for a few days, or maybe even weeks. This is in contrast to day trading, in which assets are kept for little more than a day, and trend trading, in which a trader could hold assets for weeks, months, or even years in response to market movements.
Crypto swing trading’s position on the crypto trading strategies spectrum has several advantages and disadvantages. It would help if you had a firm grasp of these pros/cons. For instance, something you must keep in mind is that swing trading a cryptocurrency requires additional due diligence because of these assets’ high volatility and unpredictability.
How Does Crypto Swing Trading Work?
Crypto swing traders trade by focusing more on the 1-hour to daily price charts. Many traders will examine the market movements for four to twenty-four hours, then move to shorter periods to execute at the best price. The daily chart is an excellent resource if you want a quick recap of intraday price action. A bullish candlestick would indicate that the market was trending upwards throughout the day if, for instance, a cryptocurrency coin rose from its low to its high and then closed higher than it opened.
More considerable periods, such as daily and weekly charts, offer a clear view of the market’s general trend by filtering out the noise created by the lower timeframes. Thus, the greater the timescale, the better the market information. This trade’s outcome depends on the data you collect.
High and medium time frame charts are the norm for swing traders. Why? Confirmation from a higher period is required for a significant uptrend or downturn. But, they may also look at intraday time frames, such as the 1-hour, 4-hour, and 12-hour charts, to hunt for particular entry and exit opportunities. For example, these triggers might be a breakout or a retreat on a lower period.
However, the daily chart is the most significant period for swing trading. Even yet, trading and investing techniques might vary significantly among various traders.
Swing Trading Crypto Strategies
With that in mind, let’s now go through some swing trading crypto ideas. You may recognize some of these terms if you have experience trading day stocks or other assets. As previously noted, you may combine these tactics with your current approach.
Don’t Miss The Wave
Traders using this method anticipate price movement in response to an established market trend. After discovering a trend, they will seek to capitalize on it in a single massive trade. Visualize a surfer picking out a wave and riding it by paddling in the same direction as the water. In this scene, the surfer rides the wave for a little distance before jumping off.
Trade with a Breakout and Retest
When using the breakout technique, swing traders wait for the price to break through a significant level of resistance or support before entering a trade. If you’re using a breakout trading strategy, wait for a retest. They anticipate that the price will return to the resistance level, which will act as support if there is a reversal after a breakout.
Trading with the Trend
Traders specializing in “swings” might also benefit from the trend trading method. Trend traders attempt to profit from an ongoing movement in the market, whether that movement is up, down, or sideways.
The trendline, rectangles, and other indicators like moving averages, average directional index, and relative strength index are all used by trend traders.
Stay With the Flow
The fourth tactic for swing trading crypto is to do what everyone else is doing. A trader using this method studies the historical price action of a coin to pinpoint critical support and resistance zones. Once again, this time frame is open and may be anything from a day to a month.
The resistance level is the highest price at which a coin will not break. If the cryptocurrency price drops below the support level, it will likely stop falling and move in the other direction. The current currency pricing is like lanes with bumpers on a bowling alley. A coin’s value will oscillate between its resistance and support levels. It’s important to remember that the long-term trend of these values might be up, flat, or down.
How to Get Started With Crypto Swing Trading?
Swing trading crypto is an excellent strategy for novice traders to try, as mentioned before. One can make decisions calmly and track transactions easily because of the extended (but still reasonable) periods. To begin crypto swing trading, you must create a trading account with a reliable exchange.
Before diving in, new users must practice with “paper trades” on the site. If you’re not a seasoned trader, you need to educate yourself. It is wise to enter the market with only a bit of investment. Make sure you are risking only what you can afford to lose.
As you get started, it’s essential to educate yourself about the cryptocurrency market at large and the specific coins you want to trade.
Closing thoughts
Swing trading crypto is a popular method of trading stocks and cryptocurrencies alike. Depending on the specifics of each trade set, a swing trader could hold a position for a few days to a few weeks.
Which is better, day trading or swing trading? The best way to determine which is better for your trading style is to test them out. Also, familiarize yourself with basic risk management concepts like stop losses and position size before you start.
After all, spreading out your cryptocurrency holdings is one of the best ways to keep your risk under control. However, it would help if you prioritized analytics.