crypto swing trading

When choosing a trading strategy in the cryptocurrency market, a trader should proceed from his trading experience, personal qualities, the size of the deposit, and the availability of free time for trading.

The more strategies a trader knows, the richer his experience and the more profitable situations he can see in the market. Swing trading is one of the types of trending strategies that involve opening trades in the direction of price movement. With strict adherence to risk management rules, the number of unprofitable transactions to profitable ones is relatively small, and the strategy itself is understandable even for a novice trader. 

This trading style is based on the use of price changes. However, like all trading strategies, but its peculiarity is that the position is held open for some time (usually from several hours to 2-3 days). The main goal of swing trading strategies is to get the most profit from a small number of trades.

A trader who chooses this trading style strives to keep the trade open as long as the instrument is moving confidently in one direction. As soon as there are signs of an impending price reversal, it is time to close the deal. You need a lot of experience and professionalism, and most importantly, great endurance to make transactions in this way.

Swing trading strategy trades depend on the market cycle and capitalize on its movement. A trader must have excellent analytical skills, be flexible, and react quickly to any change in the market situation.

Basic principles of the swing trading strategy

Swing trading strategies are based on trends following in the mid-term range. Transactions can last as long as several hours or several days. They open only when there is a pronounced trend.

Swing trading strategies can rely on various combinations of technical analysis and decision-making methods. This strategy has certain rules within the framework of which an experienced trader operates. 

These rules will look like the following:

  1. The swing trading strategy aims to open a few trades and keep them in the market for as long as possible. From the point of view of minimizing risk, it makes sense to close the deal at the first local reversal. But using stop loss, you can keep all deals until the trend changes direction, opening another deal on a local correction and ensuring it at the breakeven point.
  2. The correctly chosen moment for entry will be when the movement will be directed to profit immediately after the transaction’s opening. If this does not happen, and the price moves towards a loss within 2-3 hours, then the deal is closed manually as soon as possible.
  3. You can immediately fix a quick jump in the price towards profit since, subsequently, you can enter again on a pullback after this sharp movement. A quick and small income in swing trading can be a stepping stone to additional profits.
  4. All correctly opened trades are closed by stop loss or take profit.
  5. It makes sense to carry over to the next trading day only those transactions that are in profit. Loss positions must be closed on the same day.
  6. You should avoid opening positions at the time of market openings or significant trading sessions. It is also recommended closing deals before news that can reverse the current trend, as well as during a clear trend reversal.
  7. Swing trading eliminates trend fighting. You must enter on a signal and exit if the situation has changed.
  8. You should not enter the market if you doubt the development of events in the medium term.
swing trading

It is recommended to use only major cryptocurrency pairs, minimum leverage, and no more than 2-3 assets at the same time for successful trading according to these rules.

One of the difficulties of swing trading strategies is the need to monitor the chart (psychological stress) constantly. The trader is required to find an entry point before making sure that it is about the continuation of the initial movement and not about the correction of a new opposite movement.

Mastery in swing trading comes down to determining the strength of the trend, the moment of the reversal, and learning to distinguish a local correction from a change in the price movement direction.

Tools for identifying the trend and analyzing retracements

  • Patterns. Candlestick patterns show the moment of trend reversal and correction.
  • Oscillators and trend indicators. Shows the strength of the trend, overbought and oversold zones. Another signal of a future reversal is divergence (data divergence between indicators and the price).
  • Levels. Often a price rebound occurs from a significant level at which an accumulation of stops or take profits is formed.
  • Market sentiment and multi-timeframe analysis. An indicator is showing the ratio of the number of orders and volumes of transactions in the Depth of Market.
  • Correlation. Some assets are directly or inversely correlated. For example, gold and major currency pairs. And reversals on them relative to each other may appear with a delay. The reversal of the price of the auxiliary instrument can be used to predict the reversal of the main asset.

Benefits of swing trading strategies

The advantage of swing trading strategies is that an open position within 2-5 days allows exiting the trade when sufficient profit has been made. You can profit regardless of the direction of the market movement and make money in any situation.

Typically, the profit that this trading style brings is greater than that of scalping and other intraday strategies. But a trader receives all these advantages only if he knows how to choose the right trends and correctly interprets events on the market.

AdvantagesDisadvantages
Versatility and frequent market entry signals. Swing trading involves opening trades on corrections in any direction. The trader makes money on short-term movements by opening deals at the extreme of the correction, so the trader does not care about the direction of the trend. It is essential to distinguish a correction from a change in the direction of price movement.Relatively low profitability in points of one trade. A swing trader enters the market on pullbacks at the best price and closes the trade at the next reversal. One movement on average is 5-15 points, depending on the timeframe, while on intraday strategies, you can take income within the average volatility of more than 20 points. Only scalping has lower profitability of a trade.
Fast results of transactions. What is swing trading? It is a short-term trade. The effectiveness of a trading strategy is visible within a few hours. It is also a plus from a psychological point of view. If a trader sees an error after a few minutes, he quickly closes a losing trade and changes the position’s direction.The need for a deep understanding of market behavior, constant monitoring of the news. The reasons for local corrections can be fundamental factors or the influence of institutional investors, market makers. The trader must understand the nature of the current movement. 
No swap charges. Swap fee for moving open trades to the next day.Psychological stress. The trader must identify the trend, constantly look for the best entry points, and close trades on time. A constant presence at the computer causes fatigue, distraction, and emotional stress.
swing trading strategies

The implementation of swing trading strategies in practice has some features:

  • The volume of transactions. Large leverage is not used. An open position must be able to withstand occasional and short-term trend corrections.
  • Entry points are the moment of trend reversal and the emergence of a new trend. Strong news is usually the reason for the reversal. You need to select news from the general stream that can form a powerful long-term trend. The position should be opened with absolute confidence in the reversal, and if the range of movement against the trend is greater than the usual value of the correction.
  • The duration of the transaction. The transaction remains open while profits are generated. It is recommended not to close profitable trades but to fix profits.
  • Closing deals. The reason for exiting a trade can be either news, which will change the trend in the opposite direction, or the beginning of a reversal.

It is recommended to choose a medium-term trend in its initial stage to enter a trade. With a correct entry, the position immediately begins to grow towards profit.

Who should use swing trading strategies?

This trading style can bring high profits to the cryptocurrency market, but not all traders can use it effectively.

Who is it forWho is not suitable
Swing trading strategy is suitable for a patient, cold-blooded, and reserved crypto traders.For traders who trade in an active and fast-paced style, this strategy will not work.
The strategy is suitable for traders who strive to make money on the quality of transactions and not on their numbers.Traders who want to get results from swing trading strategies quickly.
The swing trading strategy is suitable for those who can place large stop orders.For those who are nervous, overly emotional, and easily lose control of themselves when the market goes in the wrong direction.
Those who do not have the opportunity to spend several hours every day analyzing the market situation.

You can open positions for several days. More funds are required to start trading than intraday trading.

Swing trading strategies are suitable for beginners, but first, you need to undergo training in crypto trading, get basic knowledge, learn to identify trends, calculate and control risks. If a trader is willing to take the time to learn all the intricacies of swing trading and learn how to manage his emotions, then this trading style will bring him a good income.

What are the differences between day and swing trading strategies?

There are traders in the cryptocurrency market who perform day trading operations.

Due to the hype of Bitcoin and other cryptocurrencies, new participants entered the market in 2017. Newbies who had previous trading experience could profit from Bitcoins and other crypto assets every day.

The main difference between day trading and swing trading is based on the time frames in which investors enter and exit the market. A day trader is an investor trying to make a profit by making quick trades within a single trading day.

swing & day trading

Day trading operations are performed by traders who buy and sell an asset for up to 24 hours. Day traders try to enter the market at a very specific moment when an asset changes direction. In general, the best time for a day trader to enter the market is when the asset experiences an increase in volume and a sudden rop.

The goal of day trading is to wait and sell the asset at a good profit. If the asset suddenly rises, the trader can wait until a reversal occurs during the same day. If the asset falls, the trader will try to implement the same strategy and exit the market as soon as the asset hits bottom.

One can do day trading due to the inherent volatility of Bitcoin and other cryptocurrencies.

Day traders may prefer to go for safe and small profits rather than taking risks to wait longer and get higher profits.

Investors carry out swing trading over a longer period (from 2 days to 2 weeks).

Depending on the volatility of the asset, swing traders can make large profits from their positions. While the day trader will close his position during the day, hesitant traders will wait for the asset to move higher (or lower) before leaving the market.

Other differences between swing trading and intraday strategies:

  • The principle of trading. The swing trader makes money on price swings and corrections. It can work both along with the trend and against the trend. In some cases, swing strategies also work in the consolidation range. The day trader has a wider arsenal of strategies.
  • Tools. A swing trader prefers a predictable market, so he tries to avoid opening trades at a time of fundamental volatility. The day trader, on the other hand, often uses fundamental analysis.
  • Amount of deals. A day trader can hold one trade in the market all day with little control over it, thereby saving time. A swing trader who makes money on local corrections has to spend more time in front of the monitor. Traders can open deals on several assets at the same time to recoup time.
  • Risk assessment approach. A swing trader will prefer to make money in a straight segment of price movement by closing a trade at the first clear signal of a reversal. It is common for a day trader to sit out holding a trade in the market in case of deep drawdowns.

The money management of swing trading strategies

The swing trading strategy has the same risk management as conventional trend trading:

  • No more than 2% of the capital for a loss on one trade.
  • The profit-to-loss ratio should not be less than 2:1.
money management

The rule itself is very convenient considering its use in medium-term trading. If we have a deposit of $1000 per trade, we will expect a loss of no more than $20. Considering that the trader trades with the trend and can enter it in time, the profit can be about $80. The potential loss will be about 100 pips, and the potential profit will be up to 400 pips (the profit-to-loss ratio is 4:1, that is, $80 profit per $20 loss). The swing trading strategy demonstrates the effectiveness of trend trading.

In addition to the standard use of stop orders, you can also make trading more flexible and adaptive. To do this, when working within swing trading, instead of taking profit, you can use a trailing stop or move the stop loss after the price, first to breakeven and then to profit.

Using a swing trading strategy gives you a relatively safe income with little effort. Working with the trend without using complex schemes or strategies and short duration of transactions helps to achieve success. Besides, the swing trading strategy has a flexible analysis system, which helps to adapt trading to your preferences as much as possible. However, it is worth noting that this trading method is not suitable for every beginner. Only experience and understanding of the situation helps to set up your trading according to it properly.

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