A beginner's Guide to Swing-trading
- 2 mins
Typically, swing trading involves holding a position either long or short for more than one trading session, but usually not longer than several days, weeks or a couple of months. Although, some trades may last longer than a couple of months and are still seen as swing trades.
Swing trades can also occur during a trading session. Albeit, this is rare and is a result of volatile conditions.
In this article, we will show what you need to know about swing trading cryptocurrency and help you decide whether it is right for you.
Swing trading is a commonly used trading strategy that can be ideal for beginner traders. It is a relatively convenient way to express opinions about the market due to the manageable time horizons involved. Swing traders are active in most financial markets such as forex, stocks, and cryptocurrency. But is swing trading a suitable strategy for you? Should you start day trading or swing trading?
How Swing Trades Works
Swing trading seeks to count on the upward and downward “swings” in the price of a security. Traders hope to capture small moves within a larger overall trend. Swing traders aim to make a lot of small wins that add up to significant returns.
For example, other traders may wait five months to earn a 25% profit, while swing traders may take 5% gains weekly and exceed the trader’s profit in the long run.
Most swing traders use daily charts (like 60 minutes, 24 hours, 48 hours, etc.) to choose the best entry or exit point. However, some may use shorter time frame charts, such as 4-hour or hourly charts.
Swing Trades vs Day Trading
Swing trading and day trading appear similar in some respects. The main factor differentiating the two techniques is the holding position time. While swing traders may hold stocks overnight to several weeks, day trades close within minutes or before the close of the market.
Day traders do not hold their positions overnight. It often means they avoid subjecting their positions to risks resulting from news announcements. Their more frequent trading results in higher transaction costs, which can substantially decrease their profits. They often trade with leverage to maximize profits from small price changes.
Swing traders are subjected to the unpredictability of overnight risks that may result in significant price movements. Swing traders can check their positions periodically and take action when critical points are reached. Unlike day trading, swing trading does not require constant monitoring since the trades last for several days or weeks.
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Swing trading is a commonly used trading strategy in the stock market, as well as it is in cryptocurrency. Swing traders will typically stay in positions for a few days or weeks, depending on the individual trade setup.
Should you start swing trading or day trading? The easiest way to find out is to try them out both and see which one fits your trading style best. It could also be helpful to learn about risk management principles before you start, such as using a stop loss and proper position sizing methods.
Still eager to learn more about swing trading methods?
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