Day Trading Versus Swing Trading
Choose Your Strategy.
Traders, regardless of experience, have to fine-tune their strategies constantly, and are always looking for the perfect methods that suit their risk and emotional profile. In crypto trading, a trader can opt to either day trade (scalping), or swing trade. Here, we discuss the benefits of both trading styles and then differentiate them. Once you read this guide, you’ll know what each methodology entails and what’s required in helping you make a better choice.
For any cryptocurrency trader, the primary motive is to generate profits. Trading is always a rollercoaster ride, with highs and lows here and there, occasional massive profits, and the cycle goes on. At the end of the day, you always seek to have made more profits and have the inevitable dopamine rush that comes with being on top. To ensure this outcome, there are tools at the disposal of any smart trader.
To use these tools effectively, your analytical skills have to be on point. The analysis is vital because a trader takes his or her time to pick out projects which may be undervalued (or undervalued) for investment (or quick exits) depending on his/her prognosis.
Then there is the technical analysis where patterns are critical and human psychology plays a significant part. Ultimately, if the Zen moment kicks in and you consistently select winners, regardless of underlying fundamentals or technical analysis (remember not to use many technical indicators), you will often be in line for a handsome payday.
Trading As an Art
Generally, a good trader has to have impeccable timing. A skillful trader will always stay at the top of his/her game, and not let emotions interfere with their selections. After picking a preferred market trend and identifying core areas they can reliably predict, a fitting strategy can be developed.
Here, a trader can either choose to be a day or a swing trader. The choice one opts for depends on, first, time, and second, experience. There is the psychological aspect that’s often understated but in all these methodologies, a trader should be ready to ride on in all the ups and downs of crypto trading. Unlike traditional markets, the crypto market is largely unregulated and fractured. Still, there is an opportunity for enterprising and disciplined traders.
Day trading is mostly rule-based and demands adopting a structured approach. Positions are closed before the day is over. On the other hand, swing trading is where a position can be held for longer than a day.
In both styles, money can be made or lost. However, it will soothe your heart to know that crypto trading is not a rich-quick scheme. It takes time and effort.
Sometimes losses can be made but that can be mitigated if there is a solid risk management plan in place.
Why Swing Trade?
If you master how to consistently read charts based on fundamental or technical analysis (or both), and use this skill to make intelligent guesses on market directions, your winner count will surpass the losses count and that’s how you stay afloat.
Still, a trader must have a solid understanding of the mechanics underpinning cryptocurrencies. This is an emerging field with unique characteristics that make it different from traditional markets.
Regardless of the strategy used, it is good to know that you can’t trade every day. The number or frequency of setups largely depends on volatility. If there is sufficient volatility and buy or sell signals are frequently printed, positions can be opened confidently.
However, swing trading is fundamentally different from day trading. Here are some of its benefits:
- Swing trading allows for easy automation. This advantage is because swing trading is easier to learn and execute. As such, a trader can easily automate by infusing trading aids such as candlesticks, expert advisors, or custom indicators. These are availed CryptoAltum’s MT5 software. With automation, a trader can execute more trades than it would be the case if this was done manually. Still, caution must prevail and a trader must learn the ins and outs of trading before opening multiple swing positions.
- There are unlimited options when trading cryptocurrencies since the markets are open every day of the week. And in situations when the exchange is offline due to scheduled or corrective maintenance, CryptoAltum traders will be notified in advance so that they can make necessary adjustments. A trader should limit his/her market exposure. The general rule of thumb is that open positions shouldn’t exceed one percent of the initial margin. That’s not forgetting a stop loss in all trades just in case the markets take a turn for the worst. Remember, every posted trade has a chance of becoming a loser and a trader should prepare for such ugly eventualities.
Why Day Trade?
On the other hand, day trading remains a big drawer for most technical traders. In this strategy, a trader can open multiple positions in the same or different pairs but exit before the day’s close. Positions are only opened as long as those trading opportunities offer a potential for a quick profit. This trading strategy also demands quick decision making and high accuracy when position sizing or timing stop losses, take profits, or entry.
Unlike swing trading, this strategy demands volatility. Volatility is just a measure of how quickly the price of an asset rises or falls. The faster, the higher the volatility, and the vice versa is true. Note that in crypto, it is common for pairs to surge 50 percent in a single day and then take an inverted V-turn, draining traders’ accounts. Other factors that a trader should keep track of is liquidity and entry timeliness.
Once a buy or sell signal prints and there are acceptable volatility and liquidity levels, a perfect entry can differentiate between winners and losers. In an illiquid market, a timely entry can nonetheless result in losses because of huge spreads, slippage, or the broker simply not executing the trade instantaneously.
While lucrative, day trading has higher risks and is not meant for everyone. Those who withstand high market volatility (not forgetting associated stress) while remaining analytical can opt to day trade.
Still, day trading benefits are as below:
- A trader can quickly get in and out since long or short signals tend to be many in smaller time frames.
- Unlike swing trading which may demand a higher stop loss margin, day trading requires lower capital requirements to get started regardless of leverage used.
- A trader is active, different from swinging, day trading demands one to keep track of multiple charts. This makes it more thrilling but can admittedly be stressful.
Regardless of the path taken, day and swing trading are more like second cousins. In both methodologies, a trader seeks to make a profit from crypto price fluctuations.
Day Trading versus Swing Trading: The Difference
Here are four key differentials that will determine whether one fits in any of the above methodologies risk profile:
In day trading, positions are opened and closed the same day. A trader can open only but a few trades to hundreds depending on generated signals. As opposed to this methodology, a swing trader opens but a few trades every month since a position is only opened once it “swings” from one end to another. A position need not be opened every day.
With day trading, you’ll have to sacrifice everything, giving the firstborn to trading. You won’t keep a day job as well because you will be required to make fast and quick decisions, glued to multiple charts every day of the week.
Meanwhile, there is freedom in swing trading. Since trades are only posted depending on fundamentals or technical triggers, a trader can take a breather. A trader can also maintain their day job, post trades on a part-time basis, and still turn a profit.
3. Profit Expectations
Usually, day trading is on smaller time frames — between one to 15 minutes. This means profit targets and expectations should be lower. Ideally, a scalper should have a daily target in mind depending on the employed trade plan. On the other hand, although signals may be lower, profit potentials remain high since the traded time frames are larger. This makes swing trading fun. While a profit target can be set, a trader can let his/her profits run a little bit longer meaning a trader can book more profits than a day trader.
On the surface, day trading cryptocurrencies may be risky. However, there is an element of control since trades are closed every day. This provides more control meaning one can combine this with adept risk management to grow his account. On the other hand, by allowing a position to “swing”, a trader losses control. Still, it is less riskier than day trading since a smaller margin is used and larger time frames.
To Wrap It Up
Ultimately, the choice depends on you. As a checklist, ask yourself these questions:
- What’s your level of experience?
- How much money do you have to trade?
- Is trading your primary source of income?
- What’s your risk appetite?
Regardless of your preferred methodology, CryptoAltum provides the necessary tools to meet your technical and fundamental analysis needs. There are over 66 technical indicators and news streams just to update the trader of all developments at any time of the day from the top-ranked MT5 platform. Additionally, CryptoAltum has a Telegram channel where free trading signals are posted everyday by experts.
If day trading, CryptoAltum trades are executed instantaneously with the lowest industry spreads and no commission or hidden fees. Combined with high leverage of up to 500, this increases your chance of turning in a profit every day.
Originally posted on https://cryptoaltum.com/en/blog/information-hub