How Does Swing Trading Work?

Swing trading is a crypto trading strategy in which investors purchase and hold assets in order to profit from anticipated price movements. Swing traders have the flexibility to change their positions just like market conditions fluctuate.

Swing trading, as opposed to day trading, is much less predictable but far more aggressive than holding a position for a longer period of time. This allows you to obtain profits and losses when trading an asset that has an influence on the overall reward and risk mitigation.

Swing trading, like any speculative endeavor, does not function for all investors, but it can be incredibly lucrative for those who know how to use it correctly. This blog post is written for you to find out the details about swing trading.

How Swing Trading Works

Instead of making larger gains over longer stretches of time, how does swing trading work? It involves obtaining a portion of an anticipated price move over a few days or a few weeks.

A swing trader might do this by setting a stop loss order and aiming for a specific price point. Technical analysis can also be used by the trader to forecast price movements in the hopes of making a profit.

How Does Swing Trading Work
photo by: Bybit Learn

The swing trader goes on to find the next chance after making money from an expected price movement. Swing trading’s goal is to accumulate a number of small to medium victories that can add up to a significant overall return.

The goal of traders is to profit from minor trends inside a larger overall trend.

Swing traders, on the other hand, may generate 3 percent gains weekly and outperform other traders’ long-term returns while other traders might need to wait three months to get a 20% profit.

Is Swing Trading the same as Day Trading?

Yes, and no.

Day trading and swing trading complement each other in certain ways. However, maintaining position time is the major element that sets them apart.

Day transactions close in a matter of minutes or just before the market closes, although swing traders may hold equities for several days or even longer.

The positions of day traders are not kept overnight. It frequently means that they do not expose their holdings to risks brought on by news announcements. Their greater transaction expenses as a result of their more frequent trading can significantly reduce their profits. They frequently use leverage in their trading in order to gain the most from slight price swings.

Pros and Cons of Swing Trading

Like other trading strategies, swing trading has benefits and drawbacks. Swing trading can be profitable if appropriate chances can be found and losses can be reduced using effective stop loss strategies. But swing trading has certain dangers.

Here are the advantages of swing trading:

The time commitment is less strict

Except when a crypto trading setup is developing and you want to go down to the 4-hourly period to choose a better entry price, swing traders often conduct their technical analysis on the daily timeframe.

Unlike day trading, when you have all day to monitor your price chart and examine the data produced every 15 or 30 minutes, depending on your period, you only have a short window of time at the end of the trading day to do your research.

Swing trading can be extremely lucrative.

Swing trading may be hugely profitable and stress-free with the right approach and risk control. Swing trading can produce respectable returns if your plan is constantly followed.

Swing trading often offers annual returns of 10 to 50 %, which is higher than the broad market return. But maintaining consistency requires mental strength.

It offers you more flexibility in managing your funds

In contrast to long-term trading, swing trading does not allow you to have your money committed to a terrible stock for an extended period of time. When a trade is not performing as expected, you move your money to another coin that has a trade setup and accepts a minor loss.

Disadvantages of swing trading:

Market timing is challenging.

Timing swing trades is more difficult since short-term capital markets have a tendency to behave more erratically than long-term ones.

There’s a chance you’ll miss out on exceptional coins

Swing trading seeks to make money off of certain price fluctuations. You attempt to enter at the commencement of a fresh swing and exit at the beginning of a retreat. However, by doing so, you risk passing on a fantastic trade that would have generated greater profits as a long-term investment.

Useful and Effective Strategies for Swing Trading

Technical analysis, which seeks to forecast future price movements based on the past performance of investment security, is widely used in swing trading strategies. Swing traders should always keep an eye out for a shift in price movement, trade on price weakness, or hunt for specific technical patterns and that’s where technical analysis comes into play.

Strategy #1: ‘Stuck In A Box’

Silly as it sounds, the name of this strategy is meant to help you understand how this works better for your understanding.

This trading approach uses support and resistance levels to track a market range. The market is sometimes thought of as being trapped in a box between the two lines above and below a result.

  1. Find a variety of markets.
  2. Watch for a price break below the support level.
  3. A major price rejection could be expected if the price breaks below the Support level (a close above Support).
  4. If there is a significant price rejection, buy on the opening of the following candle.
  5. Put a stop loss of 1 ATR below the candle low and collect your winnings before resistance.

You will want a thorough understanding of your daily candlestick chart as well as support and resistance levels to accomplish that goal with this swing trading cryptocurrency approach.

To make sure you don’t go over these limits, it will be crucial to use your stop-loss and take-profit levels.

Strategy #2: ‘Catching the wave’

Catching “one move” in a trending market is the main objective of this swing trading approach (like a surfer trying to catch the wave).

When the pullback has ended and the trend is expected to continue, the aim is to enter.

However… Not all trends are suited to this.

How Does Swing Trading Work - catching the wave strategy
photo by: TopFXmanagers

Traders often spot a trend, such as one with a 50-period moving average, and attempt to ride it.

One of the most used tools in swing trading and is the besindicator is the moving average. These figure out the average price movement of a cryptocurrency asset over a period of time. A crossover might show a bullish or bearish momentum if one is found. Moving averages can also serve as levels of support and resistance.

Let’s say the price of bitcoin is getting close to the moving average. In that instance, traders will hold off on going long on the following candle until there has been a bullish price rejection.

How will I know if the following candle is a bullish or price rejection signal?

Before making a transaction, you must wait for the candle to close. A bullish price rejection occurs when the candle closes forcefully near the range high. A bearish price rejection occurs when the candle closes forcefully close to the range low.

You may now be wondering:

“But why use a moving average of 50 periods?”

I follow the 50-MA since it is closely observed by traders worldwide and could result in a self-fulfilling narrative.

Additionally, it is more noteworthy when the 50 MA coincides with formerly strong resistance that has converted into support.

Now, this doesn’t imply you can’t use a moving average of 52, 60, 85, or any other number you like because the idea is what counts.

Watching out for the risks!

The main rule of any swing trading and day trading crypto strategy is to never take on more risk than you can bear to lose. Setting stop-loss conditions is the best strategy to reduce your risk once you’ve entered a trade.

Additionally, stop losses might be established to safeguard your money when you’re not at your computer because swing trading frequently necessitates holding positions overnight. These make sure you take reasonable profits and that any losses don’t completely wipe out your money.

The goal is to limit your losses to manageable amounts so that your cryptocurrency profits will eventually outweigh your losses.


In Dontwantaboss’ online academy, we start teaching swings in month 8/9 after day trading because the capital requirements are high, you need patience and experience navigating different crypto markets to prevent panic selling swings if your strategy doesnt pan out immediately #cryptomadesimple #tradingcryptocurrency #learntotrade #learntotradecrypto #cryptoforbeginners

♬ original sound – Martina, Learn to Trade Crypto

Having the right implementation of risk management, profit target calculators, live streaming from reputable news sites, and taking mentorship classes (if you are willing to learn seriously for over 4 months) are other helpful resources.

Swing trading strategies on crypto can also be practiced using simulators that some exchanges offer.

Although swing trading is not as quite similar to day trading because of the position time, the concept itself is the same. I made an article about my 2 favourite simulators for day trading crypto that will help you practice trading without using real money.

Want to know if trading crypto is fit for you? Book a FREE 15-minute discovery consult with my former student, Susanne!

That’s it for swing trading! Let me know what you think in the comments below.

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