Reduce the Risk: Swing Trading vs. Day Trading Crypto | FTX.com
By Donald Gray
Originally published on FTX.com on June 7, 2022
If you're new to the cryptocurrency market, getting a grasp on trading strategies can seem daunting. With so many assets and such a volatile market, how can you safeguard your investments and ensure that you make the most profit possible?
One popular strategy gaining traction in recent years is swing trading. So, what is swing trading crypto?
In short, swing trading is a strategy that involves holding onto an asset for an extended period to take advantage of price swings. Holding an asset for longer increases the chances of catching a more significant price movement.
Swing trading can be an excellent strategy for beginner investors because it doesn't require constant monitoring like day trading. Swing traders typically hold onto an asset for a few days to several weeks before selling, so it can be a less time-intensive strategy.
This article will cover swing trading, how it works, and some tips to get you started.
Key Takeaways:
Swing Trading is a great investment strategy for new and seasoned traders to take advantage of longer-term trends and price swings in the crypto markets.
The strategy was popularized in forex and traditional capital markets but also applies to cryptocurrency.
Instead of following minute changes in markets to buy low and sell high, swing trading involves holding an asset for a few days or weeks and then selling when the price is higher.
Swing trading is less time-consuming than day trading and can still be profitable in sideways or consolidating markets.
Day Trading Crypto vs. Swing Trading Crypto
If you've seen movies like The Wolf of Wall Street or Trading Places, you might think that day trading is the only way to make money in the financial markets. Scenes of traders working around the clock to take advantage of every tiny price movement might make you think that's what it takes to be a successful trader.
In reality, day trading is just one type of trading strategy - and it's not even the most popular. Many professional traders prefer to swing trade, which involves holding an asset for extended periods to take advantage of more significant price swings.
So, what's the difference between day trading and swing trading? Let's take a look:
Day Trading
Day trading is a type of trading that involves buying and selling an asset within the same day. Day traders try to take advantage of small price changes in an asset by opening and closing multiple trades throughout the day.
Day trading can be a risky strategy, especially for beginner investors. You need to have a firm understanding of the market and the asset you're trading, and you also need to make split-second decisions and have the discipline to stick to your strategy.
Swing Trading
Swing trading is a type of trading that involves holding an asset for a more extended period to take advantage of more significant price swings. Swing traders typically hold onto an asset for a few days to several weeks before selling.
Swing trading is less risky than day trading and can still be profitable even in sideways or consolidating markets. That's because you're not trying to profit from small price changes - you're looking for more significant price swings that you can ride for a more extended period. This is an excellent strategy if you don't want to be glued to your computer screen all day monitoring the markets or if you're starting and need more confidence to day trade.
How to Swing Trade Cryptocurrency
Now that you know what swing trading is, let's look at how you can swing trade cryptocurrencies.
The first step is to find a good cryptocurrency exchange. There are dozens of exchanges to choose from, but not all are created equal. Make sure to do your research and only use a business you trust. FTX is one of the world’s top exchanges and gives traders a wide array of tools to implement strategies like swing trading.
Once you've found a good exchange, the next step is to choose the right cryptocurrency to swing trade. Like exchanges, not all cryptocurrencies are created equal, and some are more volatile than others.
Bitcoin, for example, is the most popular cryptocurrency but can also be subject to significant price fluctuations. This means that while it is the most established asset in the cryptocurrency space, you could still profit from volatility in the Bitcoin market.
Other cryptocurrencies, like Ethereum and DogeCoin, are also well established and may offer opportunities to profit from medium to long-range swing strategies.
Starting out, it's a good idea to stick with the more popular and stable cryptocurrencies like Bitcoin. As you become more experienced, you can start to look at other, more volatile assets.
Once you've chosen the right asset to swing trade, developing a trading strategy is next. Your plan will determine when you buy and sell an asset and how you manage your risks.
There are many ways to swing trade cryptocurrencies, so it's crucial to find a strategy that suits your risk tolerance and investment goals.
One popular strategy is to buy an asset when the price starts to trend up and sell when the price begins to trend down. This strategy can be used in any time frame, from daily charts to weekly or even monthly charts.
Another popular strategy is to buy an asset after it has experienced a sharp drop in price in the hopes that it will rebound back to its original value.
This strategy can be risky, as you're trying to buy an asset when you think it's at its lowest point, but it can also be very profitable if the price does rebound.
The key to swing trading versus day trading is to think about overall trends in a larger timeframe. Swing trades are not meant to be profitable in the first minutes or hours after an order is filled, so you should trade assets that you believe are trending up in the medium to long term.
By zooming out on the timeline, you can better assess market trends and make more informed decisions about when to enter and exit a trade.
Crypto Swing Trading Tools
Getting started with swing trading is as easy as finding a reputable exchange and setting up an account. The idea behind swing trading is more than what tools you need but more about having a solid strategy and using market trends to your advantage.
A few essential tools can still help you swing trade cryptocurrency more effectively.
The first tool is a good charting software. This will allow you to visualize market trends and make better-informed decisions about when to enter and exit a trade.
When trading on FTX Pro, you'll have access to real-time market data and the ability to zoom in or out on an asset's price history, making it easier to spot trends and potential entry and exit points.
Another essential tool for swing trading is a cryptocurrency news aggregator. This will help you stay up-to-date on all the latest news and developments in the market, so you can make more informed decisions about which assets to trade.
CoinMarketCap's Crypto News section is an excellent resource for keeping up with the latest happenings in the market.
Finally, it's also a good idea to have a solid risk management strategy in place. This means knowing how much you're willing to lose on a trade and setting stop-loss and take-profit orders accordingly.
A stop-loss order is an order to sell an asset when it reaches a specific price, and a take-profit order is an order to buy an asset when it reaches a particular price.
Setting these parameters when you open a position is a crucial step that can help you help protect your profits and limit your losses, even when you're not actively monitoring the market.
The most important thing when swing trading crypto is always to remember that the goal is to make money over the medium-to-long term, not in the short term.
This means that you need to be patient and disciplined and only enter trades when you're confident they have a high chance of success.
Advantages of Swing Trading Crypto
Swing trading crypto is a great way to get started in cryptocurrency trading and can be a profitable strategy for those willing to put in the time and effort to learn the ropes.
Some of the main advantages of swing trading include the following:
- You can trade on various timeframes, from daily to weekly and even monthly charts.
- It's a relatively low-risk way to start cryptocurrency trading compared to day trading.
- You can set stop-loss and take-profit orders to limit losses and protect profits.
- It's a strategy that can be used to trade various assets, not just cryptocurrency.
Disadvantages of Swing Trading Crypto
While swing trading can mitigate some risks in cryptocurrency trading, it's important to remember that risks are still involved.
Some of the main disadvantages of swing trading include the following:
- You need to be patient and disciplined to be successful.
- You need to understand market trends and technical analysis well.
- There is still the potential to lose money, even with a solid strategy.
- When looking at a more extensive timeline to execute trades, you may miss out on profitable entry and exit opportunities, depending on market conditions.
The Final Word on Swing Trading Crypto
Swing trading is a great way to get started in cryptocurrency trading and can be a profitable strategy for those willing to put in the time and effort to learn the ropes.
However, it's important to remember that risks are still involved, and you must be patient and disciplined to succeed.
If you're willing to take on the risks, swing trading could be a great way to make money in the cryptocurrency market, and FTX is here to help.
FTX is a cryptocurrency derivatives exchange that gives traders the tools they need to trade successfully in the digital market. With our intuitive interface and industry-leading liquidity, you can implement various trading strategies to profit from cryptocurrency, forex, leveraged tokens, and derivatives products with the confidence that your trades will be executed smoothly and quickly.
If you're interested in staying up to date with the latest news, analysis, and industry trends, be sure to follow @FTX_Official on Twitter.
If you're ready to start swing trading cryptocurrency, head over to FTX.com and register an account today!