Crypto Swing Trading Explained

With Tradu you can trade crypto via CFDs.

Digital currencies form one of the most volatile, tradable markets. While it's becoming increasingly popular, to trade crypto successfully requires a workable strategy to help to maximise opportunities and profits.

A swing trading crypto strategy offers a way to potentially make profits from smaller price movements. However, it's imperative to commit time and effort into research and acquiring the skills needed to be able to make significant gains. Continue reading to discover how to swing trade crypto.

Read our guide to crypto trading

What is crypto swing trading?

Swing trading in crypto is an approach that focuses on making a profit in the digital currency market on smaller price swings that occur as part of a wider range or trend. Traders look to identify swing highs (during bull markets) and swing lows (during bear markets) to enter a position that's likely to make gains.

A large aspect of swing trading in crypto is spotting the fluctuations that provide opportunities. While similar to day trading, swing trading the crypto market usually involves opening positions over a longer time period than a single day. However, unlike position trading, which can play out over months or more, swing traders look to capitalise on more frequent trades.

What is the best crypto for swing trading?

It's well known that digital currencies make up one of the most volatile markets in the world. This is what makes swing trading an appealing strategy for those looking to trade crypto and capitalise on its frequent fluctuations. For this reason, though, it's impossible to give a single answer as to the best crypto to swing trade.

Your chosen digital currency will depend on a few factors, including your knowledge of the market and the particular cryptocurrency that you're thinking of trading. Generally, newer digital currencies, or altcoins, are considered riskier, while Bitcoin and Ethereum are often seen as the best crypto currencies to swing trade, especially for those newer to trading.

This is because they're more established, so their price fluctuations are slightly more predictable than some other digital coins in the market.

Crypto swing trading strategies

Swing trading is a strategy in its own right so, when considering this approach with crypto, you should take into account the variety of tools and indicators available to help to maximise opportunities.

To be able to successfully use these methods, it's crucial to have a good knowledge of technical analysis.

Moving averages

Moving averages are useful to confirm an established trend in a particular crypto market. When using this to swing trade crypto, you'll want to identify the average price movement of a digital currency within a certain time period.

There are two types of moving average: simple moving averages (SMAs) and exponential moving averages (EMAs). EMAs tend to provide more accuracy as they place more weighting on recent fluctuations.

Although moving averages are a lagging indicator, meaning that they don't necessarily predict future price movements, they're still a helpful tool when looking to spot potential swings while trading crypto.

Relative strength index

This indicator is often used to identify whether a security is overbought or oversold. Establishing this can help to spot potential fluctuations and signal the best entry and exit points for a crypto swing trade.

A scale is used to determine whether a digital currency is overbought or oversold, with anything above 70 signalling overbought. Below 30, and the crypto is said to be oversold. Once the price reaches any of these points, it's likely that the market direction could change, providing opportunities for successful crypto swing trading.

Ease of movement

This is an oscillator that takes into account both price and volume. The key factor here is how easily the price seems to rise or fall, and traders can see whether it's the volume of trades that's affecting the value.

The relationship between the two, when plotted on a chart, can signal potential market direction reversals, making it a useful tool when swing trading in crypto.

What is the best crypto swing trading strategy?

Rather than employing just one method when swing trading crypto, most professional traders take into account multiple approaches and indicators. While this is true across most markets, it's especially important to rely on more than one strategy when trading digital currencies due to the increased volatility and risk.

As well as technical indicators and analysis used in swing trading approaches, it's wise to gain knowledge of fundamental analysis as many factors can affect the price of crypto currencies. The crypto market is notorious for moving at high speed and market conditions can change in an instant.

Read more in our guide to crypto trading strategies.

Benefits of swing trading crypto

One of the main benefits of swing trading in crypto is the lack of time pressure that is often seen in day trading. While you'll still need to be on the ball when it comes to monitoring price movements, swing trading offers the advantage of leaving open positions for longer periods.

Using financial derivatives such as CFDs, it's possible to swing trade crypto on both rising and falling markets, allowing for plenty of opportunities to enter positions.

As the goal of swing trading is to make profits from smaller price fluctuations, there's ample opportunity to make small and frequent profits, providing that you have the expert knowledge in applying a range of technical indicators.

What are the downsides of swing trading crypto?

All trading strategies come with risk but there tends to be significantly more risk when trading crypto.

Despite applying multiple levels of analysis and indicators, it can still be challenging to predict price movements when swing trading crypto and the market can often change rapidly. This can leave you open to greater potential losses than you'll generally face in other markets.

Due to the nature of swing trading, positions are usually entered on a mid-term basis. This can mean that some traders will likely miss opportunities to gain further profits had they left open the position for longer.

While day trading presents risks of its own, one aspect that doesn't come into play is having to leave open trades when the market is closed. Because crypto swing trading involves holding positions for longer, though, there is always the risk of overnight and weekend volatility.

To reduce such risk, it’s wise to make use of risk-management tools such as stop loss or stop limit orders.

How much can you make swing trading crypto?

Although many traders do make a significant profit swing trading crypto, it's not without risk and you can just as easily make a loss. It’s also not a quick profit-making solution as you'll need to have a high level of knowledge, commitment and skill to be able to analyse data and open and close positions at the right times.

You should also be fully clued up on the digital currency that you intend to trade before risking your money. This means being aware of wider market influences and the mechanics of the coin and algorithm, if applicable. The exact amount that you could potentially make swing trading crypto will depend on a variety of factors including prior research, your initial capital, your risk/reward ratio, the time period and any underlying market factors.

Trade Crypto CFDs With Tradu

Ready to begin swing trading crypto? It's easy with Tradu.

1. Sign up for an account: Open a live trading account.
2. Get clued up: Swing trading crypto can be risky, especially for those with relatively little knowledge. Take a look at our market, trading and platform guides before you begin.
3. Choose your digital currency: Pick from a variety of cryptocurrencies.
4. Create a strategy: Using fundamental and technical analysis, develop an approach that takes into consideration a wide range of factors.
5. Open, monitor and close your position: Start swing trading crypto using our advanced platform and take advantage of our intelligent features including real-time updates.
6. Diversify: Branch out and trade a range of markets including listed stocks and CFDs on stocks, forex, indices and commodities, all with your Tradu account.

Take a look at our collection of trading guides to find out more:

How to trade cryptocurrencies
Types of cryptocurrencies
Crypto Trading Strategy
Crypto day trading

The information in this article is for educational purposes only.