Swing trading is a trading style that attempts to capture short- to medium-term gains on a coin (or any financial instrument) over a period of days to weeks. Swing traders primarily use technical analysis to find trading opportunities.
In addition to analyzing price trends and patterns, swing traders can also utilize fundamental analysis.
Key takeaways
Swing trading involves making trades that last from a few days to a few months in order to profit from anticipated price movements. Swing trading exposes traders to the overnight and weekend risk that prices could gap up and open the next session at a significantly different price. Swing traders can take advantage of established risk/reward ratios based on stop loss and profit targets, or they can make profits or losses based on technical indicators or price action movements.
What is swing trading?
Learn about swing trading
Typically, swing trading involves holding a long or short position for more than a trading day, but usually no longer than a few weeks or months. This is a general time frame as some trades may last longer than a few months, but traders may still view this as a swing trade. Swing trading can also occur during trading sessions, although this is a rare result of extremely volatile conditions.
The goal of swing trading is to capture the majority of the underlying price movement. While some traders will look for volatile altcoins or bulls, others may prefer more stable stocks. In either case, swing trading is the process of determining the next likely move in an asset's price, establishing a position, and then making a substantial profit when that move materializes.
Successful swing traders only hope to capture a portion of the expected price movement and then move on to the next opportunity.
Advantages and Disadvantages of Swing Trading
Many swing traders evaluate trades on a risk/reward basis. By analyzing a coin's chart, they determine where they will enter, where they will place a stop-loss order, and then predict where they can profit. If they risk losing 1U per token on a setup that could reasonably generate a 3 USDT gain, that's a favorable risk/reward ratio. On the other hand, risking 1 U and only earning 0.75 U is not that advantageous.
Due to the short-term nature of trading, swing traders primarily use technical analysis. That said, fundamental analysis can be used to enhance the analysis. For example, if a swing trader sees a bullish trend in BTC, they may want to verify whether the asset’s fundamentals are favorable or improving.
Swing traders typically look for opportunities on the daily chart and may look at hourly or 15-minute charts to find accurate entry, stop-loss, and take-profit levels.
advantage
Swing trading requires less trading time than day trading.
It maximizes short-term profit potential by capturing most of the market fluctuations.
Swing traders can rely solely on technical analysis to simplify the trading process.
shortcoming
Swing trading positions are subject to overnight and weekend market risk.
Sudden market reversals can result in significant losses.
Swing traders tend to miss out on long-term trends and instead focus on short-term market movements
swing trading strategy
Swing traders tend to look for multi-day chart patterns. Some of the more common patterns include moving average crossovers, cup-and-handle patterns, head-and-shoulders patterns, flags, and triangles. Key reversal candlestick charts can be used in addition to other indicators to develop a solid trading plan.
Ultimately, every swing trader develops a plan and strategy that gives them an edge on many trades. This involves looking for trading setups that tend to result in predictable movements in an asset's price. It's not easy, and no strategy or setup will work every time. With favorable risk/reward, there is no need to win every time. The more favorable the risk/reward of a trading strategy, the fewer wins it will take to generate an overall profit across many trades.
What is the “swing” in swing trading? Swing trading attempts to identify entry and exit points based on daily or weekly movements of BTC or altcoins between optimistic and pessimistic cycles.
How is swing trading different from day trading?
As the name suggests, day trading involves making dozens of trades in a day based on technical analysis and complex charting systems. Day trading aims to strip small profits multiple times a day and close all positions at the end of the day. Swing traders do not close positions every day, but may hold them for weeks, months, or even longer. Swing traders are likely to combine technical and fundamental analysis, while day traders are more likely to focus on using technical analysis.
Which types of coins are best for swing trading? While swing traders can find success in any number of coins, the best candidates tend to be BTC or ETH, which are the most actively traded coins on major exchanges. In active markets, BTC and ETH often fluctuate between broadly defined highs and lows, with swing traders swinging in one direction for days or weeks, then switching to trading the other side when BTC reverses. One side direction. Swing trading is also possible in actively traded commodity and forex markets.
