Various strategies can be used to benefit when trading crypto, one of the most popular is swing trading.
What is it, and how to do it? Check out reviews about swing trading in the following article.
What is Swing Trading?
Swing trading is the name for one of the financial asset trading strategies, such as stocks, gold, crypto, and forex. The swing trading strategy is to buy financial assets and save them for several days or weeks.
Keep in mind that swing trading is different from day trading done by opening and closing positions in one day, while swing trading will open positions in a matter of days or weeks and take advantage.
This strategy will be beneficial if the trend on the market is evident because, in this situation, generally, a financial asset will move in one direction in a few days or weeks. This condition will validate and simplify traders’ analysis.
Swing Trading Method
Swing trading can be done with several strategies: price action, Elliot Wave analysis, or indicators.
However, traders often use price action by conducting support and resistance analysis.
This support and resistance will be the limit where the trader will cut the loss, install a stop loss, and take advantage of the profit.
The strategy is carried out to maintain risk management juxtaposed with a risk-reward ratio or ratio between profits and losses.
The strategies carried out in swing trading are different, but in essence, a trader will save trading positions for several days or weeks before closing them.
If using a price action combined with a visual analysis of more than one time period, there are four steps of research that need to be done, namely:
First, traders will start by doing a trend analysis to see if there is a clear trend that can be followed. Generally, traders will use daily periods to see this trend.
Second, traders will go down to graphs in lower periods; generally, a four-hour chart, to draw support and resistance areas. The aim is to determine the target of taking advantage, taking profit, cutting losses, or installing a stop loss.
Third, traders will generally see the graphics patterns created to add a confirmation before opening positions.
Fourth, the trader will go down to graphics with a shorter time, like one hour to 15 minutes, to see confirmation of candlestick patterns.
After that, some traders generally use additional confirmation with indicators to ensure price movements.
One of the most commonly used indicators is the Moving Average and relative strength index to help see the volume and trends in the market.
Swing Trading Advantages
This trading style has quite a lot of benefits, including the following.
Calm
The calmness in question is that this trading style does not require traders to continuously monitor the positions that have been opened, especially on weekends.
Easy
Besides, this trading style also makes it easier for traders to let their position open and not have to open or close quickly.
This trading style is almost close to a way for traders to produce passive benefits. Because by not being monitored and left alone, a trader can generate greater profits within a more extended time.
Greater advantage
This more significant advantage is seen compared to other trading styles, such as scalping and day trading.
Because the longer the position is held, the more likely it is for the position to move according to the trader’s predictions.
If the position moves according to trader predictions, there is a possibility that the longer it is stored, the higher the benefits.
Swing Trading Risk
In addition to the advantages, some risks lurk in this trading method. They are as follows.
Can lose greater
Generally, when a trader uses a graphic with a higher period to determine the targets, losses and profits will be even greater.
So compared to scalping or day trading, the potential losses experienced by traders in this strategy are also getting more significant.
Difficult to return capital
In addition, with swing trading, when experiencing continuous losses, it takes relatively long to return funds to return on investment or profit.
Because swing trading requires quite a long time, it also needs relatively high patience from the trader.
Traders are not thorough.
Finally, the potential risk is negligence from traders when forgetting to install a take profit or automatic stop loss to secure positions.
But some traders are in the loss of average down. The strategy is carried out on men.
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