Swing trading is a commonly used trading strategy that can be ideal for beginner traders. It's a relatively convenient way to express opinions about the market due to the manageable time horizons involved. Swing traders are active in most financial markets, such as forex, stocks, and cryptocurrency. But is swing trading a suitable strategy for you? And if so, how to swing trade crypto?
In this article, we'll explain what you need to know about swing trading cryptocurrency and help you decide whETHer it's the right choice for you.
What is Swing Trading?
Swing trading is a trading strategy that involves trying to capture price moves that happen on a short to medium time frame. The idea behind swing trading is to catch market "swings" that play out over a few days to several weeks.
Swing trading strategies work best in trending markets. If there's a strong trend on a higher time frame, swing trading opportunities can be plentiful, and swing traders can take advantage of larger price swings. In contrast, swing trading can be more difficult in a consolidating market. After all, if the market is going sideways, it's harder to capture large price changes.
How Do Swing Traders Make Money?
As mentioned, swing traders aim to capture price swings that happen from a few days to several weeks. As such, swing traders will hold positions for more time than day traders, but less than buy and hold investors.
Swing traders will typically use technical analysis to generate trade ideas, though not necessarily to the same extent as day traders would do. As fundamental events can play out over weeks, swing traders may also use fundamental analysis in their trading framework.
Even so, price action, candlestick chart patterns, support and resistance levels, and technical indicators are very commonly used to identify trade setups. Some of the most common indicators used by swing traders are moving averages, the Relative Strength Index (RSI), Bollinger Bands, and the Fibonacci retracement tool.
Swing traders will typically look at medium to high time frame charts. Why? A strong uptrend or downtrend has to be confirmed on a higher time frame. But, they may also look at intraday time frames, such as the 1-hour, 4-hour, 12-hour chart, to look for specific entry and exit points. These triggers can be a breakout or a pullback on a lower time frame, for example.
However, the most important time frame for swing trading is likely the daily chart. Even so, trading and investment strategies can differ substantially between different traders. Note that what we've discussed here aren't strict rules, but just common examples.
How to Swing Trade Crypto
Swing trading can be an ideal way to start trading for beginners. Reason being, due to the longer time horizons (that are still not too long), decisions can be made calmly, and trades can be monitored easily. If you're comfortable with your knowledge about trading, you could then try out paper trading on the exchanges’ testnets. This way, you can test your swing trading skills without risking real money.
So once you feel like you're ready, you can start trading on a cryptocurrency exchange. There are multiple options available, but the BitKan platform offers hundreds of market pairs, margin trading, perpetual futures, and much more. Many of these products can be ideal for swing trading opportunities.
Closing Thoughts
Swing trading is a commonly used trading strategy in the stock market, as well as it is in cryptocurrency. Swing traders will typically stay in positions for a few days or weeks, depending on the individual trade setup.
Should you start swing trading and how to swing trade crypto? The easiest way to find out is to try it out and see if it fits your trading style best. It could also be helpful to learn about risk management principles before you start, such as using a stop loss and proper position sizing mETHods.
