Do you want to beat the crypto market but don’t have time to sit and watch charts every day? Then crypto swing trading might be a perfect option for you. In this article we will talk about what it is, the best brokers to choose and the best indicators and strategies to use for swing trading.
What is swing trading crypto?
Swing trading is a trading style that capitalizes on medium period gains of crypto. The period of trades varies from a few days to weeks. Crypto swing traders use trend following techniques. Technical as well as fundamental analysis is important for swing traders. Huge variety of indicators and strategies can be found in swing traders’ arsenal.
Brokers to use for crypto swing trading
For swing trading you should choose from brokers with low overnight position cost. This is the case if you are using leverage on your positions. Brokers listed below offer margin and/or futures accounts for the maximum profits on your positions with low upkeep cost.
Stormgain
Binance
Bybit
What indicators to use for crypto swing trading?
When it comes to swing trading, traders usually use trend following indicators. Since most of the swing trades won’t last longer than two weeks time frames are important too. In most cases swing traders use charts varying from 1 hour to 1 day.
There is nothing exceptional with indicators used for swing trading. Oftenly they are the same as used for other trading styles. Indicators such as moving averages, MACD, Bollinger Bands and others are common in swing traders arsenal.
However some indicators occur more often among swing traders than day traders or scalpers. It is important for swing traders to find local tops and bottoms. But since they capitalize on longer trades it is important to find trends that could possibly last for at least several days. In this case crypto swing traders rely more on trend indicators rather than oscillators while opening positions.
So, indicators like moving averages, MACD helps to enter the market. Also, trend lines, fibonacci retracement levels can be used.
For exit points swing traders tend to use reversal indicators or oscillators. So, in this case relative strength index (RSI), stochastic and others are used.
Crypto swing trading strategies
Crypto swing traders use a wide variety of strategies in trading. Usually the combination of several strategies are used by a single trader. There are some major ideas most of the swing traders use for finding entry and exit points for their crypto positions.
Breakouts
Breakout by definition is when the price of the crypto moves above resistance area, or below support area. It indicates a possible start of the trend in the breakout direction. Breakouts usually have larger volume around resistance or support area.
Also, breakouts serve the purpose of stop loss levels. In long positions stop loss is placed under breakout area and in short above break out area.
Breakouts are used in various chart patterns like triangles, flags, head-and-shoulders and others. The main problem here is that support and resistance levels are often subjective, as different traders use different patterns to determine levels. In this case volume could help to find real support and resistance levels. Volume usually goes up near real breakout levels.
Chart patterns and trendlines
As mentioned above chart patterns and trendlines have a very important role in determining important levels in swing trading. Trendline by definition is a line drawn between local lows in uptrend and between highs in down trend. Trendlines help to find support and resistance levels and also could be used as stop loss and take profit levels.
Several trendlines can create various shapes called chart patterns. The most common chart patterns are flags, triangles, head-and-shoulders.
Moving averages
Several different moving averages show whether the market is in uptrend or downtrend. When the short-term moving average crosses up, the long-term moving average market is in uptrend and vice versa.
Moving averages are typically used with other indicators of chart patterns. For example if moving averages show that the market is in uptrend, traders will look for points to enter long positions. The most popular tactic in this case is buying-the-dip strategy.
Elliott Wave Theory in crypto swing trading
Elliott wave theory developed by Ralph Nelson Elliott is technical analysis theory that describes price movements of the financial markets. As traders profit from trends in the market it is said that they are riding a wave. So, the theory tells how markets behave in trendy markets.
Wave patterns
Elliott wave theory states the price of commodity moves can be predicted, because they move in certain up and down patterns called waves. There are several types of waves such as motive waves, impulse waves and correction waves. Traders can interpret crypto charts on their own, so the theory is not absolute.
Wave theory does not provide signals itself. It rather helps traders to understand movements of the crypto price in a much deeper way.
Impulse waves
Impulse waves are made out of five sub-waves that make net movement in the same direction as the trend of the next-largest degree.
Corrective waves
Corrective waves, which are sometimes called diagonal waves, consist of three—or a combination of three—sub-waves that make net movement in the direction opposite to the trend of the next-largest degree. [1]
Crypto swing trading vs day trading?
Opposite to day trading, swing trading by definition is a trading style that makes profit from longer period trades. Day traders can open and close several trades per trading session, while swing traders make trades that could last from several weeks to months.
Indicators
Crypto swing traders and day traders use different indicators as well. Swing traders make the most profit from longer trends. So, naturally they use trend indicators such as: moving averages, fibonacci retracement levels, trend lines and others.
On the other hand day traders more oftenly use oscillators, because they time the markets reversal points perfectly. So, the most popular indicators for day trading crypto are: RSI, MACD, Bollinger Bands, Stochastic and others.
Timeframes
Timeframes usage is another important difference between two styles of crypto trading. Naturally day traders use shorter time frames starting from 5 minutes all the way to 1 hour. Therefore swing traders use time frames from 1 hour all the way to 1 day chart.
Strategies
Both swing trading and day trading strategies are different. As mentioned before swing traders concentrate on trend following strategies. Day traders often use market reversal strategies.
Risks
Crypto swing traders use smaller leverages and positions in trading as they have an overnight risk on their side. Negative news, catastrophes or even Elon Musk’s tweets can be a huge risk while holding your positions overnight.
Day traders use a larger portion of their portfolio on their positions, along with bigger leverages as well. The biggest agvantage here is an ability to act on market moves instantly. In this case day traders capitalize on smaller market moves, but get bigger relative profit on each trade compared to swing trading.
Is swing trading crypto more profitable than day trading?
There is no definite answer to that question. Both trading styles have their one pros and cons. Swing trading is less time consuming, while day trading often is a whole day activity. Not every trader can devote a whole day to trading, so naturally swing trading is more popular among people with full time jobs.
In terms of profitability if the trader is good it doesn’t matter what trading style is he or she using. Both styles have their own risks, so traders have to decide what fits their personality and lifestyle the best.
Conclusion
So, in this article we looked over swing trading crypto. As every trading style swing trading has many different tactics and strategies. Before starting to trade it is important to understand the main ideas swing traders base their trades on. The most popular technical analysis tools are moving averages, trendlines, chart patterns, Elliott Wave theory and others. Crypto swing trading differs from day trading on several different levels, but you can not say that on style is more profitable than the other.