4 Proven Swing Trading Strategies for Cryptocurrency Traders

What Is Swing Trading?

Swing trading involves executing infrequent trades, over what could be a few days or weeks. Crypto traders, using a swing trading strategy, buy and hold cryptocurrency to take advantage of price movements over a longer period than crypto day trading, often ignoring smaller price fluctuations. However, swing trading is not a long-term strategy like HODling.

Why Swing Trading Is Popular Among Crypto Traders

This strategy can be popular because it doesn’t require intense, constant price and technical analysis in quite the same way as intra-day strategies. So, swing trading can suit traders with other commitments, though it can be used by day traders, too.

Swing trading capitalizes on short to medium-term price movements, riding out some of the shorter-term market volatility and, when successful, benefiting from larger price moves. It’s a strategy that can leverage price movements that happen between bear and bull markets. Swing trading allows traders to take advantage of gains within more defined timeframes, using market technical analysis and strategic decision-making.

A successful swing trader will conduct both fundamental market analysis and technical analysis. Swing traders must understand market sentiment and influences as well as the factors that affect the cryptocurrency of choice directly, like its credibility or utility. They should aim to buy or enter a trade at a “pullback” in the market and sell or exit the trade when the crypto’s price rallies.

1.    Trend-Catching

Trend catching involves identifying trends and then trying to capture gains from the sustained trajectory of the asset.  Traders who follow trends will often hold their position until a trend changes. Swing traders might exit a position when their profit target is reached, but they will also use trend-catching to identify price directions to profit from short-term positions.

2.    Breakout Swing

Breakouts happen when prices move above resistance levels. This type of swing trading leverages price breakouts with open long positions at the start of an uptrend.

3.    Breakdown Swing

This is the opposite of the breakout swing strategy. It involves the trader using moving averages and oscillators to take a short position when a crypto breaks below a support level, at the beginning of a downtrend.

4.    Fading Trading

This strategy involves buying when the market is selling, and selling when the rest of the market is buying. It’s a countertrend principle that goes against trading momentum. The idea of fading trading is to wager on a market reversal and to profit from a market correction because cryptocurrencies can be so inherently volatile.

Other swing trading strategies include buying the dip, mirroring the market, and market reversal trading.

Choosing the Right Cryptocurrency

Swing traders may watch a variety of potential cryptocurrencies for their viability, monitoring aspects like trading trends and wider market movements. They should look for indicators apparent in technical analyses (as well as fundamental and market analysis) before making the decision to buy or sell a cryptocurrency. These indicators include relative strength index (RSI indicator), moving average (MA indicator), Bollinger bands (BB) as well as patterns like triangle trading, flags and pennants, and head and shoulders patterns. 

Risk Management Techniques

The risks of swing trading can be managed by conducting both fundamental analysis and technical analysis. Fundamental and market analysis will identify factors relating to the cryptocurrency itself as well as market sentiment and events that greatly impact crypto prices. Traders should also use stop loss orders to ensure as much of their investment as possible is protected, even when they are not actively trading or monitoring their portfolios.

Another way to mitigate cryptocurrency and trading risk is with a diversified portfolio of cryptos and strategies. Traders should also ensure they comprehensively understand cryptocurrencies and trading as well as their own risk tolerance, while never investing or spending more than they can afford to lose.

Tools and Resources for Swing Traders

Swing trading is very popular, and it can use the same or similar tools to other trading strategies so there are lots of tools and resources to consider. These can include:

• Charting software and platforms
• Technical analysis
• Indicators and oscillators
• Demo accounts, simulators, and back testing tools.
• Journals and performance trackers
• Algorithmic trading and automation
• Portfolio management
• Mobile apps, signals, and alerts
• Risk management tools.
• News outlets and platforms
• Trading psychology and behavioral finance
• E-learning courses
• Brokerage services or accounts

There are many mistakes that can be made in swing trading. Here are a few pitfalls traders should watch out for:

• Investing too much in one trade without diversifying, results in overexposure.
• Not understanding cryptocurrencies and trading effectively.
• Overconfidence
• Trading difficult and unclear patterns.
• Not cutting losses
• Trading emotionally
• Focusing too much on tops and bottoms.
• Misunderstanding technical analysis indicators.
• Not managing risk or being disciplined.
• Trading without a plan
• Shorting against an uptrend
• Not accounting for market or fundamental factors.
• Being too influenced by market sentiment or events.
• Being impatient
• Forgetting stop-loss and take-profit orders.

How to Swing Trade Right as a Beginner

Beginner traders may do well to start out with simple beginners crypto strategies that don’t require an in-depth knowledge of technical analysis. Beginners should also make sure they learn as much about cryptocurrencies, trading, and technical analysis as possible to limit their risks.

Most platforms will allow beginners to create a demo trading account, which is a great way to learn and practice trading techniques without risking real money.

Credible cryptocurrencies with both volatility and liquidity can be popular with swing traders. The best crypto to swing trade will depend on a trader’s research, analysis, and risk tolerance, as well as what’s currently happening with a specific cryptocurrency, as the performance, volatility, and price of cryptos change all the time. Popular cryptos for swing trading have included:

• Bitcoin (BTC)
• Ethereum (ETH)
• Cardano (ADA)
• Polkadot (DOT)
• Binance Coin (BNB)

Pros

• Swing trading does not demand constant monitoring, so it is less time consuming than day trading
• Swing trading can capture larger price movements than day trading
• It allows for diverse strategies, considering numerous indicators and market patterns
• Swing trading can be applied to both bullish and bearish markets.

Cons

• Volatile prices can result in unexpected losses, especially outside of trading hours
• Swing trading needs more patience than day trading
• There is the potential for drawdowns, as sideways price movements can limit profits
• Swing trading is challenging when major news is expected that will influence crypto prices, as this can lead to fast and significant price moves

Swing trading is more advanced, but less intensive than day trading. There are many different swing trading strategies, some of which are mentioned here. On the whole, traders can discover and apply any number of strategies to suit their knowledge, interest, and risk tolerance.

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