Technical analysis is a core component of swing trading. Detecting trends and price movements that develop over the medium term is the key to success with this type of trading. Here will breakdown the strategies, differences, and possible techniques used in the world of swing trading for crypto.
What is swing trading?
Swing trading is a style or method of trading in which the trader holds a position for longer than a day. Usually, this type of trading involves keeping assets for intervals of two days, three, or in longer time horizons weeks.
But never for longer than a month, or any spam of time that could be considered long term. Swing trading sits in the middle of the short term and long term trading strategies.
A swing trader's objective is to aggregate the selected asset's price action over its held time. This is why it is a medium-term strategy. The underlying assumption is that the positive trend will prevail over negative price moves over the period chosen over the period and net a profit for the trader.
A swing trader is not too concerned with exiting or entering the market at the perfect time. Instead, spot a sustainable trend that will world upon the medium term, ride it, and capture all the value possible from the movement.
As algorithmic trading grows in popularity, more and more traders turn to swing trading and trend trading to avoid competing with machines. Trading programs almost exclusively work in the short term, so the longer the time horizon, the fewer humans have to compete with trading programs.
How does swing trading work for Bitcoin?
In the cryptocurrency markets, 75% of all traders are done by trading bots. In short time intervals, human traders have little chance of defeating these programs. This is why more and more crypto traders are using swing trading as a way to profit. In the cryptocurrency markets, this method of trading works the same as outlined before.
There is one crucial caveat when swing trading in Bitcoin and cryptocurrencies in general, the crypto market is much more volatile than others. The price swing in crypto can be more dramatic than in stocks or bonds, where swing trading originated. So, traders need to have a higher risk tolerance and look at days and the medium term, not weeks, as they are considered in traditional markets.
Besides this one significant difference and some other smaller ones, all the tools and strategies used for swing trading are also applicable in the crypto market. And here, too, the main reason to do so is to avoid competing with the robots in the short term.
Many tools can be used for swing trading. Some of these are:
Charting websites
As said before, technical analysis is the cornerstone of swing trading. To perform this type of technique, a site capable of showing graphs, indicators, support lines, moving averages, etc., is crucial. Any person looking to swing trade first needs to perform extensive technical analysis, and some of the best platforms to so are:
- TradingView
- TD Ameritrade
- Stock Charts
- Yahoo Finance
Price Analysis
Another powerful tool is sites that do price analysis. They are important because a sole trader can make mistakes when it comes to analysis and conclusion. So, it is important to have a source of information from a 3rd party to compare and contrast one's findings. Many are the sites in crypto who offer this service for free, such as:
- Remitano
- CoinTelegraph
- CoinRivet
A trading journal
A trading journal is one of the essential tools in any form of trading. The exercise of logging every single trade, the time, the position is taken, the market situation, etc. will make you reflect on all the critical choices made and their consequences. Many sites offer free journals, so there is no excuse not to use one. Some are:
- Blockfolio
- Tradervue
- TraderSync
Swing trading vs. day trading
Many people confuse swing trading and day trading, but it is important to separate both. Not because one is better than the other, but because having them separate in your mind will help you know when to apply one or the other. So, for our comparison we have:
| Swing Trading | Day Trading |
| Time Horizon | Medium-term | Short-term |
| Method of making a profit | Accumulation over time | Small price variations |
| Capital requirements | 10.000$ | 25.000$ |
Time horizon
As we discussed before, swing trading takes place over days or even weeks. Day trading is focused on minutes or hours. This means a day trader opens many more positions for a month than a swing trader. The volume of trades needs to be managed in different ways.
A day trader has to track all of the many positions and close them in a day. A swing trader tracks a few positions but for a more extended period.
Method of making profits
A day trader has to take advantage of price differences happening within the trading session. Entering and exiting the market occurs continuously, and the profit rates are low, but the number of them in short succession will generate profits over time.
A swing trader will hold a position over time, hoping that during the days or weeks this position is open, the trader will make money in the end---both for upwards trends and downwards.
Capital requirements
A day trader needs 25.000$ as a minimum capital requirement for most brokers out there. This is to have enough money to make a profit and cover all the fees involved. Now, in crypto, there is no such industry standard, but 25 thousand is a fair amount of money to use as a benchmark.
There are no minimum capital requirements for a swing trader, but generally, it is considered that 10.000 dollars is a safe number. This allows the trader to take substantial positions across many trading pairs that will net them a profit.
10 swing trading strategies
Some of the most used strategies are:
Uptrend profit
Asset prices don't move in straight lines; instead, they climb in zigzag lines like steps going upwards. A moving average is a good indicator that can show this type of movement ahead of time. As a swing trader here, you want to enter at the start of the trend. Then wait for a day to profit by the period.
Again, it is not vital to strictly enter at the perfect time because the profit is taken by the accumulation over time, not by timing the exit.
Upside capture
No one can know for sure how long a trend will hold. So, if you have identified an upwards trend, don't wait to sell all of your positions in one go. Identify different price targets, then progressively sell along the various moments the price hits the mark. That way, if the trend reverses, you will have some profits already accumulated.
Upward counter trend profit
As said before, assets' prices don't move in lines. So, in an upward trend, there are moments where the price goes down. These are good times to take on positions and make profits in the price evolution's countertrend side.
Bear market countertrend
Without shorting the market, a swing trader can profit from a downward trend. Here countertrend swing means that for a moment, the price goes up before it keeps its downward trajectory.
Passive Management
Passive management requires a trader to identify a time for entering the market and an exit based on a time interval. This means pre-programming those periods and just let the market take its course.
There won't be any in-between course corrections or additional trades made. So, the entire profit margin depends on the accumulated profit.
Active Management
As the name suggests, this means making course corrections and taking additional positions during the trading session. If the session covers a couple of days, an active manager takes hourly positions within the larger time frame.
This is a way to combine day and swing trading. It is essential to know that the shorter trades need to be subordinated to the broader strategy.
Bull Flag
This is a short pullback that happens during an upward trend. The options are, let it play out as a passive manager or buy on one of the downward movements that form the 'flag' patterns and exit on the upside.
Bear flag
As the name suggests, this is the reverse of the previous example. Without shorting the market, the way to profit from this move is to buy at the flag's start. Then sell before the trend continues its downward movement.
Channel trading
A channel is a set of two resistance lines that move with the trend that shows the asset's lower and higher price bands. Once an upward trend has been identified, the two lines can indicate prices to enter the market and exit while the trend is sustained.
Support and Resistance
As a trend evolves, valleys can happen; this is where support and resistance form and the price is moving sideways for a while. Here there are opportunities to enter the market in the short-term and profit from the movements along these lines.
Swing trading Bitcoin or other cryptocurrencies can be done in any exchange. It is not important to access any special features, like integration with trading bots or automatic execution of positions. So, any platform will do. But some of the best for cryptocurrencies are:
Remitano
A peer-to-peer exchange that also allows investing in 10 cryptocurrencies. Remitano is great for swing trading as it has support for USDT, which is a stable coin. Any trader can open a position versus any supported cryptocurrency and then exit the market with a simple swap of the crypto for USDT in less than a second. The exchange also supports many FIAT currencies across many markets, so exchanging for local money is easy and fast.
eToro
One of the most popular online brokers out there, eToro has grown exponentially over the past few years. It has comprehensive support from a large pool of assets, including cryptocurrencies. However, that is a weakness too. It does not support many of the crypto economy's small tokens focusing more on crypto coins with large market caps.
Some of the crypto coins offered cannot be retrieved from the exchange as it does not allow withdrawals to 3rd party crypto wallets for individual coins or countries. It depends on the country's local regulations if eToro permits to retrieve the crypto; otherwise, it is not possible and can only be bought and sold inside the platform.
CoinBase
A popular exchange for the crypto market, CoinBase has vast support for many coins and tokens. It is easy to use and works great for necessary swing trading. Many traders start in CoinBase as it is friendly and then moves to more specialized platforms. So, the exchange will always be a trendy first choice for beginners.
Conclusion
Swing trading is one of the most versatile forms of trading. Its focus on the medium-term makes it easy to manage and follow up on positions. Additionally, the longer time horizon helps with avoiding having to compete with trading bots. This is why it is taking over as the dominant form of trading. It is an important technique, and anyone looking to begin trading should start with this form.
As you start your trading journey, make sure you are prepared first. Never commit more money than what you are willing to lose, as you'll make many mistakes at the start. Follow up on all the resources listed here and others provided on Remitano
