Did you enjoy swinging back and forth on a playground swing when you were a kid? Well, we did too. Interestingly for cryptocurrency traders or those who are just about to kickstart their trading journeys, there’s a strategy that works similarly. This approach, called swing trading, involves gaining profits from the “swinging” market prices of cryptocurrencies.

To help you know whether it’s suitable for you, let’s take a closer look at everything you need to know about swing trading. 

What is swing trading?

Swing trading is one of the most commonly used approaches in financial markets, such as forex, stocks, and cryptocurrencies. This strategy involves capturing price movements or “swings” in markets over a few days to weeks. Swing trading is ideal in trending markets where traders can make the most of larger or higher price swings.  

How can I make money by swing trading?

Swing traders use different approaches in capturing cryptocurrencies’ price movements anywhere from a couple of days to several weeks. They often use technical analysis and fundamental analysis to create trading strategies. 

  • Technical analysis involves looking into the historical market data of assets like cryptocurrencies. This market data includes a crypto’s price and volume. Analyzing the previous market trends and patterns helps traders and investors predict future market behaviors. 
  • Fundamental analysis involves studying an asset’s “fair market,” or real value, by examining its qualitative and quantitative factors, such as its market capitalization and other economic indicators. Unlike technical analysis that’s often used for predicting price movements, fundamental analysis is used to determine whether an asset’s price is overvalued or undervalued. 

Interestingly, some—if not most—swing traders don’t just pick one strategy to create trading strategies. They often combine these two to look for favorable trading opportunities. Doing so allows them to capture notable price movements and prevent idle times. 

If you’re a longtime crypto trader, you’ve probably noticed that swing trading is quite similar to day trading. Contrary to popular belief, day and swing trading strategies are very distinct from one another.

Day trading vs. swing trading: What’s the difference?

Day trading involves completing many trades in a day. This short-term trading strategy involves buying and selling cryptocurrencies in an attempt to generate profits quickly. Most of the time, day traders use technical analysis to develop their trading strategies. Since they aim to complete multiple trades in a day, they don’t hold positions overnight. Day traders hold assets for as short as a few minutes to hours, depending on how profitable a trade is.

Because it appears to be relatively easy to do and profitable—no matter how small or big the amount is—in a very short period, day trading is considered to be one of the most popular trading strategies in the crypto world. However, because of how fast an asset enters and exits a trade, it’s important to note that day trading may not be ideal for making fast, huge, and consistent profits.

On the other hand, swing trading involves timing. Because swing traders are carefully speculating and waiting for notable crypto price swings to earn a profit, they can be considered more passive than day traders who frequently monitor the market. They take advantage of a cryptocurrency’s volatility, so they often hold their assets for a few days, weeks, or months.

Since swing trading takes relatively longer to play out, it’s not that challenging to keep track of the trade. It’s considered an ideal approach for beginners because it gives them plenty of time to think their trades through, unlike with day trading that requires quick decisions and fast executions.

Swing trading tips to get you started

If you’re completely new to swing trading, here are some tips you can try to get started.

1. Look for the right crypto to trade

Currently, there are over 7,000 cryptocurrencies on the market, according to Coin Market Cap. This means that you can pick from thousands of coins to trade. But how can you choose the most suitable coin for your trading needs?

In swing trading, cryptocurrencies with the largest market capitalization are considered the best options. These are often the most actively traded coins on cryptocurrency exchanges and marketplaces, like Bitcoin (BTC), Ethereum (ETH), and Tether (USDT), for example.

Swing traders witness these coins in active markets swinging either extremely high or low. They make the most out of these volatile cryptocurrencies by going on one side of the trade for a few days or weeks and then switching to the other when the price swings in the opposite direction.

2. Find a safe and reputable crypto exchange

After carefully choosing which cryptocurrency to use, pick an online exchange or marketplace that is secure and reliable. It would be better to check out its security features, number of users, trade volume, transaction fees or other charges, and other critical information that you need to know. This can help you decide whether a platform is right for your trading needs or not.

3. Choose the right moment

Since cryptocurrencies’ prices move unpredictably, it’s essential to be careful and wary of choosing the best time to trade. Because of the volatility in crypto markets, it’s not always easy to predict the next possible movements. A crypto’s price may be soaring right now, but no one can be sure if the momentum can be sustained after a few hours, days, weeks, or even months. Swing traders can take advantage of this “waiting period” to catch more opportunities for either short or long-term up or down movements.

4. Keep yourself updated on the latest crypto news and trading trends

Like any other innovation and business strategy, cryptocurrencies and trading approaches are evolving. That’s why it’s important to stay connected and updated about the latest trends and reports in the crypto sphere. Remember, learning never stops! And this can eventually help you level up your trading game in the years to come.

It’s all about perfect timing

As we mentioned earlier, swing trading is one of the ideal approaches new crypto traders can try their hands at. But it involves striking at the right time to capture expected price movements before you can earn some profits and move on to the next trading opportunity. So, do you think swing trading is the right approach for you? 

Try your hand at it now and know if it best suits your needs and trading style. Happy trading!

*The content of this article is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.