In the world of cryptocurrency, either you are a newbie or a guru, you must have come across the word "SWING TRADING". But do you know what it is? No, right?
This article will dig deeper into the topic, explaining what swing trading is, how it works, the best technical indicators for swing trading, and other related information!
WHAT IS SWING TRADING?
Before we can answer this question, it is essential to first explain the different trading styles.
Firstly, we have long-term trading. This most times does not require much attention over a little number of observing every single day. However, it requires more patience, and will most likely offer less frequent chances to trade.
The second part of it is the Scalper. Scalpers make ultra-short-term trades which most times last for only a few minutes, and are only looking forward to making tiny profits before withdrawing. Scalpers are always happy to gain little from here and little from there.
Nevertheless, there is a benefit to the short length of these trades, decreasing your vulnerability to the market. Another thing is, because you are only looking forward to getting tiny price movements, your chances for trading are bountiful.
One step ahead from scalpers are the day traders. They hold positions for a few hours to a day. You will never see a day trader hold a position more than the end of 24hrs. Why? This is to avoid the exhibition to any form of market-moving stories that might occur overnight.
In the end, swing trading stands somewhere between day-trading and long-term trading, with the trades taking a more prolonged period from a few days to a few weeks.
Swing traders most times lookout for a multi-day chart partner to gain from a larger price move or swings, that you may likely get in 24hrs. With that being said, swing trading could be more advantageous than day trading, depending on your strength and strategy.
Many traders find this trading style interesting because it provides a sustainable agreement between trades' consistency and the accompanying time demands.
WHO IS A SWING TRADER?
Considering what we've learnt so far about trading styles, we can conclude that swing traders are those people who trade with a multi-week time frame. Generally, they work on a 4hr (H4) and a daily (D1) chart, and they may decide to combine fundamental analysis and technical analysis to conduct their decisions.
A swing trader does not hold on to a position long enough for it to be crucial. Whether there is a long-term trend or the market is mainly restricted, it does not matter!
Instead, fluctuating is the key. The more the market fluctuates, the larger the number of short-term price movements, and so, the bigger the number of chances.
HOW DOES SWING TRADING WORKS?
Swing trading looks for a way to make the most of the rising and going down of "swings" in the price of safety. Traders aim to apprehend any slight moves within a more significant general trend.
Swing traders aspire to make a lot of little wins that increase the remarkable rewards. For instance, some other traders may decide to hold on for five months before earning a 25% profit, while swing traders may earn up to 5% rewards per week and even overtake the other trader's benefits along the line.
Most of the swing traders usually use daily charts ranging from minutes to hours, e.g. 60minutes, 4hours, 24hours, 48hours etc., to pick-out the best entry or exit point. Nevertheless, some may decide to use shorter time frame charts, such as 4hours or hourly charts.
SWING TRADING VS DAY TRADING
While swing traders aim for bigger and greater moves, day traders only aim to make the most of short-term movements. Consequently, day trading is a more active policy, as day traders don't usually leave the market. They are always monitoring; they don't leave their positions open for more than 24 hours.
Contrarily, swing traders are seen to be taking a more passive style. They don't monitor their positions constantly like day traders, since they aim to gain from price movements that take a more extended period before it plays out. As these price moves tend to be bigger, swing traders can get rewards from small winning trades.
While swing traders will use fundamental and technical analysis, but with a stronger emphasis on the technical analysis, day traders will practically make use of just technical analysis. However, investors may not even consider technical analysis at all but invest only fundamental analysis. Which one is best for you, day trading or swing trading? It is left to you decide. Being able to answer this question will help you know which of the trading strategies is best for you, your trading styles and your investments goals
THE BEST TECHNICAL INDICATORS FOR SWING TRADING
A swing trading indicator is a technical analysis tool used by swing traders to learn about new opportunities.
Swing traders want to profit from the little trends that arise between highs and lows. So, to do this, they need to recognize new momentum as quickly as possible. So, they make use of the indicators below.
- Moving averages
- Volume
- Ease of movement
- Relative strength index (RSI)
- stochastic oscillator
PROS AND CONS OF SWING TRADING
The pros:
- The time commitment is not much
- You can trade part-time
- Swing trading can be very profitable
- It releases your capital at the right time
The cons:
- You will have experience of overnight and weekend price gaps
- There is the probability of losing extraordinary and special stocks
- Market timing is difficult
- The trading cost can quickly add up
FINAL THOUGHTS
As we mentioned earlier, swing trading is one of the best procedures every crypto trader can try to lay their hands on. But it involves dedicating your time and striking at the right time to apprehend every anticipated price movement before you can earn some rewards and move on to the next trading opportunity. So, with all that has been discussed, do you think swing trading is the right procedure for you?
If yes, you can try your hand at it now and know if it best suits your needs and trading style. Happy trading!