What is Swing Trading? Explanation and Strategies for Crypto Traders
Swing trading is a popular trading strategy among crypto traders who want to profit from price movements over multiple days or weeks. Instead of executing dozens of transactions daily, swing traders try to capitalise on larger price movements that form within broader market trends.
In the volatile crypto market, where prices can sometimes move by tens of per cent in a short period, swing trading offers a balance between active trading and long-term investing. In this article, you will read what swing trading is, how it works, which strategies are commonly used, and what risks are involved.
In Summary
Swing trading is about capitalising on price movements that span multiple days or weeks.
Swing traders use both technical analysis and market sentiment to find favourable entry and exit moments.
The focus is on medium-sized trends rather than rapid intraday movements.
Popular strategies include trend following, range trading, breakouts, and retracements.
Suitable for traders who want to follow markets without constantly being glued to their screen.
Swing trading requires patience, discipline, and risk management, but offers opportunities in both rising and falling markets.
What is swing trading?
Swing trading is a trading strategy where traders try to profit from “swings”, price movements up or down within a larger trend. Where day traders usually close positions within one day, swing traders hold their positions longer, often between a few days and several weeks.
The goal is to capitalise on the middle phase of a trend: not the absolute bottom or top, but the section in between where most of the movement occurs. Swing traders use technical indicators, chart patterns, and market sentiment to determine when to enter, take profits, or limit losses.
How does swing trading work in crypto?
Swing trading in crypto follows the same principles as in traditional markets, but with one major difference: volatility. Crypto markets move faster and more severely, which means extra opportunities but also increased risk.
Timeframes: From a Few Days to Several Weeks
A swing trade typically lasts between 2 days and 3 weeks. The exact duration depends on the market structure and the strength of the trend. Traders use timeframes such as 4-hour, daily, or weekly charts to base decisions on broader trends rather than short-term noise.
Utilising Market Cycles and Price Fluctuations
Swing traders attempt to profit from repeated patterns: a phase of ascent, followed by correction, and then recovery again. By buying during temporary dips and selling during rallies, they can capitalise on the natural rhythm of the market.
Difference Between Swing Trading and Day Trading
The main differences are time and intensity.
Day traders close all positions before the end of the day to avoid overnight risks.
Swing traders, however, hold positions over multiple days, meaning they need more patience but spend less screen time.
Swing trading is therefore situated between day trading and long-term investing (HODL): active enough to seize opportunities, but not as intensive as daily trading.
Advantages and Disadvantages of Swing Trading
Advantages
Less time-intensive than day trading.
High profit potential during strong trends.
Suitable for traders who work during the day but want to follow markets.
Less stress than constantly trading on short timeframes.
Disadvantages
Price movements outside trading hours can lead to unexpected losses.
Requires knowledge of technical analysis and patience.
High volatility in crypto can change plans quickly.
Who is swing trading suitable for?
Swing trading is a good fit for people who understand markets and are willing to execute their strategy calmly. You don't need hours a day, but you do need regular attention and a clear plan.
When is swing trading less suitable?
For those who want quick results or react emotionally to price fluctuations, swing trading can be challenging. Discipline and risk management are crucial for staying consistent.
Popular Swing Trading Strategies
There are various ways to approach swing trades. The right strategy depends on your style, risk appetite, and experience.
Trend Following (Trading with the Trend)
The simplest strategy: “the trend is your friend”. Traders enter as soon as a clear trend develops and stay in as long as the trend remains intact.
Range Trading within Support and Resistance
When the market moves within a fixed range, swing traders buy at support (bottom) and sell at resistance (top). This strategy works well in sideways markets.
Breakout Trading at Key Price Levels
Here, the trader waits for a breakthrough of an important level. As soon as the price breaks above resistance or below support, it can usher in a new trend.
Pullback and Retracement Trading
Traders wait for a trend to briefly pull back to enter at a more favourable point. They use Fibonacci levels or moving averages to determine potential reversal moments.
Swing Trading with Indicators
Popular tools include Moving Averages (MA, EMA), RSI, MACD, and volume analysis. They help in recognising momentum, trend strength, and potential reversals.
Important Indicators for Swing Trading
Moving Averages (MA & EMA)
Moving averages show the average price over a certain period. The Exponential Moving Average (EMA) reacts faster to recent price changes, making it often used for short-term trades.
RSI and Stochastics
The Relative Strength Index (RSI) measures whether a market is overbought or oversold. Values above 70 often indicate overheating, while values below 30 can signal buying opportunities.
MACD and Momentum Indicators
The MACD (Moving Average Convergence Divergence) compares two averages to measure the strength of a trend. A cross between lines can indicate a trend reversal.
Candlestick Patterns and Price Action
Patterns such as “hammer”, “engulfing”, or “doji” provide insight into market sentiment. Combined with volume and support/resistance, they help swing traders make better decisions.
Example of a Swing Trade
Identifying the Trend
A trader looks at Bitcoin‘s daily chart and sees an upward trend with higher highs and higher lows.
Determining the Entry Point
During a temporary pullback towards a previously tested support level, a limit order is placed.
Setting Stop-Loss and Take-Profit
A stop-loss is placed just below the previous low, while the take-profit is set around the next resistance. This clearly defines the risk beforehand.
Exit Strategy
The trader closes the position as soon as the price reaches the target or the trend shows signs of weakening.
Systematic trading based on pre-determined rules prevents emotional decisions.
Risks of Swing Trading
Swing trading, like any form of trading, involves risks.
Overnight Risks
Since positions remain open for multiple days, price movements can occur while you are not actively monitoring. Important announcements or market events can influence the price.
Volatility in the Crypto Market
Crypto is known for its rapid price movements. A good risk plan, including stop-losses and limited capital per trade, is essential.
Avoiding Emotional Trading
Emotions like fear or greed often lead to wrong decisions. Stay rational, stick to your plan, and do not trade impulsively.
Swing Trading in Crypto at Coinmerce
Do you want to explore swing trading yourself? At Coinmerce, you can easily trade over 350 cryptocurrencies, with direct access to charts, indicators, and tools that help execute your strategy.
You can start small, learn by observing, and gradually refine your approach. Coinmerce offers a safe environment where you can experiment with swing trading, without needing technical knowledge of the blockchain.
Frequently Asked Questions about Swing Trading
What exactly is swing trading?
Swing trading is about capitalising on price movements over multiple days or weeks, with the goal of profiting from larger trends.
How does swing trading work in crypto?
Traders buy and sell crypto based on technical analysis and market trends, keeping positions open longer than in day trading.
Is swing trading suitable for beginners?
Yes, provided you start calmly, have a plan, and acquire basic knowledge of technical analysis.
What is the difference between swing trading and day trading?
Day traders close positions within one day, while swing traders hold their positions for longer.
Which indicators are best for swing trading?
Popular indicators include RSI, MACD, Moving Averages, and candlestick patterns.
How long does a swing trade last on average?
On average, a swing trade lasts between 3 days and 3 weeks, depending on the trend and volatility.