What is Swing Trading? Three Strategies that will Make You a Successful Swing Trader

by | Dec 24, 2020 | Industry | 0 comments

If you are a seasoned crypto trader and are open to trying something new, then swing trading is for you! In cryptocurrency and stock trading, the buy and hold method can be less than exciting at times. It can be likened to waiting for paint to dry to enter a room or grass to grow to mow it. 

Contrary to that, swing trading can be a little more heart-warming because you aim to gain from short term market moves. Swing trading is a general terminology that describes multiple short term trading strategies. You can still use these strategies to trade other investment opportunities such as bonds, commodities, FX, and stocks. 

Swing Trading Vs. Day Trading

Generally, a swing trader’s outlook is longer than a day trader but shorter than a long term investor. Swing traders hold their positions for over a day but less than a month. As a short term trader, you can conceivably anticipate getting profits ranging from 5-20%. This differs a lot from a HODL strategy where investors hold on to their positions for several months or even years, expecting much higher returns. 

A swing trader’s objective is to hold onto a particular crypto asset and benefit from those swings. You can find swing trading opportunities by leveraging technical indicators to recognize patterns, trend directions, and potential short-term changes in a trend. A swing trade primarily comprises three aspects: the entry point, exit level, and a stop loss. The stop loss and exit level may not necessarily remain at a constant price since they rely on the technical trigger you use in your strategy. 

How to Find a Suitable Swing Trade Coin to Trade

When looking for a suitable swing trade cryptocurrency to trade, here is what you should consider:

Catalyst: You should start by searching for a trigger that will cause a substantial price movement. A catalyst might be a significant crypto event, like Bitcoin halving, or a big tech company like PayPal entering the crypto market.

Volume: Significant volumes typically accompany significant moves in a short time frame. Therefore, you should choose a cryptocurrency with more volume than usual.

Volatility: High volumes bring more volatility, which is favorable for swing trading. A crypto trading in a tight range will not create as many opportunities as one with more significant movements. 

Three Essential Swing Trading Strategies 

  • Stuck in a Box  

In this case, a cryptocurrency is stuck trading within a given range. The idea here is to take advantage of just one swing in the cycle. To achieve this, you need to know the critical support and resistance levels. If the price breaks below the support level, you should wait for a strong price rejection to enter your trade. 

You should also set your stop loss at some buffer below the support level and make gains before the resistance level. You will definitely experience the highest probability of success if you exit before the price encounters resistance and selling pressure emerges. 

  • Catch the Wave

The concept behind this trading strategy is to establish “one uptrend move” in a market. In a bullish market, the price tends to bounce off the 50 day MA. In this method, you should aim to catch a single swing in line with the uptrend. The best time to enter the trade is after a pullback to capture the coming uptrend. 

  • Fade the Move

For contrarian traders, this is your ideal trading strategy. The fade the move strategy is more aggressive since it is a countertrend movement, meaning that you will be trading against momentum. If carried out successfully, it offers a favorable risk to reward ratio. 

Manage Your Trades

This article has addressed some of the major strategies used by swing traders. We hope that they will help you to become a better swing trader. Remember, swing trading calls for a lot of practice and experience to make good returns. We wish you happy trading! 

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