> Blog > What is Crypto Swing Trading?

Published July 14, 2022

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The crypto markets are highly volatile, and as a result, crypto traders adopt countless trading strategies from traditional finance to profit off the industry’s volatile price movements. One highly popular trading strategy used to trade crypto is swing trading. Contrary to typical trading strategies, swing trading crypto takes a bit more patience to perfect.

Let’s dive into what crypto swing trading is and how it differs from traditional day trading strategies.

Day Trading Crypto vs. Swing Trading Crypto 

Day trading crypto is defined in its name: it’s a much faster daily trading strategy in which one or multiple trades are opened and closed every day. Day trades aim to capture much smaller percentage gains in short periods of time, and thus they commonly utilize leverage to make more out of a smaller price swing.

Due to the daily nature of day trading, it is considered a full-time job and requires the most time and skill to successfully execute. 

By contrast, crypto swing trading takes a much longer trading approach. Trades are taken over a much longer period — throughout days, weeks, or even months — in an effort to capture a much larger price swing for bigger profits. Using leverage in swing trading is less common as it entails significantly more risk than trades which are only open for minutes or hours at a time. 

Due to a longer time frame, traders can execute swing trades without having to commit their full-time occupation to the market. 

Swing Trading Crypto Strategies

Now that you know what swing trading crypto is, the first step to doing it yourself is to focus on a token that you want to trade. For swing trading, it can be helpful to conduct a trade based on a project’s upcoming fundamental upgrades which could affect the token’s future price, though you can also swing trade on technical analysis alone. Keep in mind, however, that the volatile nature of the crypto markets can quickly turn technical analysis from favorable to unfavorable. 

The volatility factor critically emphasizes the need to have an awareness on the overlying macroeconomic conditions of the market when making swing trades. During bullish market environments, you can execute longs much more effectively and consistently than during bearish conditions, in which shorts tend to be much more favorable trades. 

To conduct your own swing trade, there are two primary swings that you need to recognize to be successful:

  • Swing highs: the point at which the market peaks and reverses to the downside
  • Swing lows: the point at which the market bottoms and reverses to the upside

Each peak and valley that you recognize opens an opportunity to enter a trade, either by shorting from the swing high or longing from the swing low.

Keep these three tactics in mind when executing your own crypto swing trade:

Catch the Wave 

This strategy involves trying to successfully enter a short or long position early on in a directional trend in the market. Rather than trying to catch the top or bottom, swing traders aiming to catch the wave enter shortly after the swing high or low has been set to ride the momentum shift of the market. 

Enter the Pullback 

If a trader misses the initial momentum shift in the market to catch the wave, entering the market on its first pullback offers a second opportunity to execute a swing trade. On the first initial wave, traders tend to take profits to secure their gains, which can lead to a pullback before continuing. Though this method can be less profitable than catching the momentum closer to the swing high or low, buying the pullback entails marginally less risk as the trend has now had a chance to indicate its potential future direction.

Range Trading 

Often times, after a large directional move in the market, assets can spend a significant amount of time bouncing between a range of common support and resistance levels. When recognizing this trend, swing traders can take advantage of the smaller movements between resistance and support levels.

For example, once the asset being traded reaches a defined support level, enter a long position to ride the next wave higher. When the asset reaches a defined resistance level, take profits and plan an entry for a short position to ride the momentum back down. If the range holds for some time, simply repeat this process until the asset confirms a breakout of the range, either to the downside or the upside.

Crypto Swing Trading Tools

When making swing trades in crypto, there are a few indicators and tools worth utilizing to improve your trade profitability.

Social Analysis

The first and most obvious indicator to use is social trends online. While conversation around a particular trade can often be wrong, gathering insight and sentiment from those online can be helpful for determining a trading hypothesis. Often times, social trends serve as countertrading indicators, as crowds tend to express euphoria near swing highs, whereas highly negative sentiment can indicate swing lows. 

Technical Analysis

Technical analysis is one of the most popular and helpful trading tools available to swing traders. Using analysis tools such as trend lines, volume, the Relative Strength Index (RSI), Fibonacci Retracement, moving averages, and more can help traders gain an edge on the market. These tools allow them to look beyond the price action and see what insights they can uncover from the data. 

Moving averages, in particular, are a popular choice for crypto swing traders. These lines measure the mean price of a cryptocurrency over a defined period of time. If higher timeframe (HTF) moving averages cross over lower timeframe (LTF) moving averages, it typically indicates a broader momentum shift occurring in the market.

Signal Tools

There are programs that take in sets of data to present signals when it detects underlying movements in the markets. Choosing these indicators and applying them to price charts can yield more useful insight into market dynamics. 

Keep in mind, however, that not all signal tools are created equal, and some are designed better than others. Signal tools are usually most helpful for traders after they’ve spent some time in the market and have a better understanding of what trading indicators they like to use.

Trading Bots 

Lastly, some traders like to employ automated trading robots that do their bidding for them. These bots offer flexibility for the trader to set their own parameters that must be met before a bot opens a trade. Bots are good for suiting multiple different trading styles; traders can program them to react based on various market indicators, such as volume, time, price levels, and more.

Advantages of Swing Trading Crypto

Swing trading comes with several of its own advantages over other styles of trading, such as:

  • Less time commitment: Since swing trades are usually taken over days, weeks, or months, it frees up more time for you to focus on other aspects of life without having to monitor every minute of your trade. Swing trading also means less screen time, as you don’t have to watch every move of the trade. Planning and opening a swing trade only has to take an hour or two – set it and forget it.
  • Less stress: As opposed to active trading, swing trading is more passive by nature, allowing you to keep your mind off the markets. Also, since you take less trades swing trading crypto as opposed to day trading, there are less taxable trades, which may save you a headache during tax season.
  • Maximize profitability: Successfully executed swing trades enable traders to capture a much larger gain in a single trade relative to their entry size, as the position aims to ride a large chunk of a move as opposed to a small percentage gain. 

Disadvantages of Swing Trading Crypto

Despite the benefits of swing trading crypto, it doesn’t come without its downsides:

  • Risk implication: Simply holding crypto for the long term is the least risky strategy but can also yield less profits in the short term. Swing trading carries significantly more risk and can lead to greater losses if you don’t take the proper precautions. Be sure to always set a stop loss when opening trades to avoid taking big losses if you misread price action.
  • Timing the market: As opposed to holding, swing trading requires you to time the market in order to make trades. You have to be aware of when to enter and when to exit, which takes much more time and experience to properly execute.
  • Missed opportunities: If you choose to swing trade rather than hold for the long term, you run the risk of missing out on larger price moves by closing a trade too early. 

The Final Word on Swing Trading Crypto

Crypto swing trading is not for the faint of heart, but with proper experience and discipline, it can potentially boost your short term returns and help scale your crypto portfolio. There are many different strategies to execute swing trades, so make sure you identify and utilize a strategy that suites your trading style, and always be sure to practice proper risk mitigation to minimize your losses.

FTX.com offers a diverse array of crypto trading products, including derivatives tools, OTC trading, and more. At the exchange’s core is its emphasis on effective altruism, so by trading on FTX, you are contributing to real-world efforts to make the world a better place. FTX seeks to maximize the amount of good it can spread by using a percentage of every trading fee for donations to projects focused on humanity’s long-term prospects.

If you want to support FTX on its mission, sign up for an account today, or consider joining the FTT DAO, a community of FTX fans that support the exchange and its efforts in effective altruism.

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