What is Swing Trading Strategy and How To Do Swing Trading

Trading in cryptocurrency is gradually becoming popular all around the world, and traders are now trading full-time to generate consistent returns. If you are also interested in investing in cryptocurrency, there are different strategies that you can adopt for generating profits. One such strategy is the swing trading strategy. This strategy aims to deliver returns over a medium-term horizon. Let’s explore what this strategy is all about.

What Is Swing Trading?

Swing trading is a trading strategy wherein you buy a cryptocurrency and hold it for short to medium-term periods. The objective of this strategy is to wait for an upswing in the market when you can sell the currency for realizing a profit. Under the swing trading strategy, you can hold your investment for days, weeks, or even months before you sell it to earn a profit.

How To Execute Swing Trading?

For the swing trading strategy to work effectively, you need to analyze both technical and fundamental currencies. Here’s how –

Technical analysis

Under this analysis, you should check the past performance of the cryptocurrencies and choose currencies that have been giving steady returns. You also check the technical indicators and tools to pick the right currencies.

Fundamental analysis

Under this analysis, you delve into the fundamentals of the currencies that you have shortlisted using technical analysis tools. You check the market capitalization, popularity, and future potential of the currencies. Then, you pick the most favourable currencies for trading.

Once you have invested in the chosen currencies, you wait for swing highs and swing lows. Swing highs are periods when the crypto market rallies before a pullback. This is a good time for a short-term trade. On the other hand, Swing lows are the period wherein the market hits low values only to bounce back and recover. This is an excellent time to open a long position, i.e., to buy at low values and hold your investment until the market recovers when you can sell and make a profit.

Swing Trading Strategies

There are different swing trading strategies that you can use for maximum gains. Two of the best indicators for swing trading include the following strategies –

  • Support and resistance strategy

Under this strategy, two levels or lines are charted on a graph that indicates cryptocurrency’s price movements. The support line is the lower line, and the resistance line is the higher one. The objective behind this strategy is that if the crypto values touch these lines, a price reversal is indicated. In a downswing, if the values touch the support line, it indicates that the market is poised for recovery and that the values would start rising. On the other hand, if the price hits the resistance line in an upswing, it signals a trend reversal wherein prices are expected to fall. Swing traders use support and resistance levels to buy and sell cryptocurrency at opportune times so that they can cut down on possible losses and maximize profits.

  • The moving average strategy

Under this strategy, simple average moving lines are drawn for various periods, like a 10-day SMA, 20-day SMA, 50-day SMA, and so on. If the short-duration SMA crosses over the long duration SMA, an upswing is signalled. This, therefore, means that it is a good time to invest in cryptocurrencies. On the other hand, if the line crosses from below, it signals a downswing and the time to exit the trade.

Benefits of swing trading strategy

Here are some of the benefits of using the swing trading strategy –

  • Since swing trading involves the buy-and-hold strategy, you can wait for the crypto values to rise before selling your investments. This helps you earn returns on your investment
  • Profitability is enhanced as you can wait for the best price before you sell
  • The strategy helps you tide over short-term volatilities in the crypto market

The bottom line

Understand what swing trading is and how to do it for mastering the trade of investing in cryptocurrency. You can use swing trading strategies or invest through automated crypto bots to maximize the potential of swing trading. Pick the best currencies in terms of their market capitalization and then use the swing trading strategy to build yourself a profitable portfolio. Try out Mudrex and invest in profitable investment solutions created for long-term return.

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