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What is Swing Trading?: Definition and Tips

The YouHodler Team
May 12, 2022
A picture of a trading chart moving up and down to signify swing trading

Swing trading is an investment strategy that aims to capitalize on short-term price movements to generate quick profits. While it functions with various assets, swing trading is uniquely popular when trading cryptocurrencies. Swing trading is also different from day trading, as usually positions are held for longer periods. When trading cryptocurrencies, traders often use technical analysis to identify potential entry and exit points. In this article, we will define swing trading and offer some tips on how to get started.

What is swing trading?

Swing trading is an investment strategy that aims to capitalize on short-term price movements to generate quick profits. While it functions with various assets, swing trading is uniquely popular when trading cryptocurrencies. It involves taking a long or short position in an asset and holding it for days or weeks, to capitalize on price swings. This is done with stocks, forex pairs, commodities, or cryptocurrencies. 

Many traders use technical analysis when swing trading, as it can help to identify potential entry and exit points. Swing trading is a popular investment strategy for a few reasons. First, it is done with a variety of assets. Whether it's stocks, forex, commodities, or cryptocurrencies, you can use swing trading to suit your needs. Second, swing trading can be a relatively low-risk way to trade. Positions are for a short period. Lastly, trades are based on price swings. This type of trading can be profitable even in markets that are trending up or down.

ApeCoin's (APE) bearish volatility this week. Great opportunity to swing trade.

If you’re new to swing trading, we recommend starting with a demo account first. This will allow you to practice trading without risking any real money. Once you feel confident, you can then start live trading with a small amount of capital. When it comes to choosing a broker, make sure to select one that offers a good selection of assets as well as technical analysis tools.

You will also need to decide on a swing trade system. There are many different systems out there, so it’s important to do your research and find one that suits your needs and risk tolerance. Swing trading can be a great way to make quick profits. However, it’s important to remember that like any other type of trading, there are risks involved. Before getting started, be sure to educate yourself on the risks and potential rewards of swing trading. If you're interested in trying out swing trading, there are a few things to keep in mind. 

First, have realistic expectations about your profits. Swing trading is not a get-rich-quick scheme, and it may take some time before you see any significant results. Second, don't be afraid to take some losses. Not every trade is a winner. As long as you stick to your strategy and keep your losses small, you can generate consistent profits. Finally, have fun! Swing trading can be a great way to make money, but it's also important to remember that it's not worth sacrificing your mental health. If you're feeling stressed or burned out, take a break from trading. Try again when feeling refreshed.

Examples of swing trade systems

Swing trading works best when markets are neither too volatile nor too sedate. For example, a stock swinging up and down between $20 and $30 per share is ideal for swing traders. In contrast, a stock constantly fluctuating between $15 and $20 per share may be too volatile to generate consistent profits.

In addition, a stock that never moves more than a few cents per day is likely too sedate. With currencies, swing trading can be profitable in trending and range-bound markets. However, it may be difficult to find entry and exit points in a ranging market. Swing trading can be profitable in both trending and range-bound markets.

What are the disadvantages of swing trading?

While swing trading can be a great way to make money, there are potential downsides to consider. First, because you're holding your positions for a shorter time, you may miss out on some of the longer-term profits you could generate if you hold positions for a longer period. Second, swing trading can be riskier than other types of trading due to the potential for wider price swings. And lastly, because you're constantly opening and closing trades, you may incur more transaction costs than someone who is simply buying and holding their positions. Here are five disadvantages of swing trading:

  • You may miss out on some of the longer-term profits
  • Swing trading can be riskier than other types of trading
  • More transaction costs
  • Potential for wider price swings
  • May not suit everyone's personality type (e.g. risk-averse investors)​.

What are the advantages of swing trading?

Swing trading can be a great way to make money, but it's also important to remember that it's not worth sacrificing. If you're feeling stressed or burned out, take a break from trading and come back when you're feeling refreshed.

PRO TIP! - Click here to learn how to manage risk and emotions when trading crypto

Some potential advantages of swing trading include:

  • The ability to make quick profits
  • The opportunity to trade in volatile markets
  • The possibility of earning large profits
  • The flexibility to trade around your schedule
  • The chance to learn about different markets and asset classes​

As you can see, there are several advantages of swing trading. If this is something that interests you, here are a few useful tips to help you get started:

Find a system that works for you: There are many different swing trade systems. Do your research and find one that suits your needs and risk tolerance.

Start with small position sizes: When you're first starting, it's important to not risk too much capital on each trade. Position size is the number of shares or contracts that you're trading. As a general rule, you should never risk more than you can afford to lose.

Have realistic expectations: Swing trading is not a get-rich-quick scheme. It takes time, patience, and discipline to succeed. Don't expect to make millions of dollars overnight.

Be prepared to take some losses: Not every trade will be a winner. That's just the nature of the markets. The key is to keep your losses small and manage your risk.

Have fun: Swing trading can be a great way to make money, but it's also important to remember that it's not worth sacrificing your mental health in the process. If you're feeling stressed or burned out, take a break from trading and come back when you're feeling refreshed.

Is it worth it?: Swing trading crypto

So, is swing trading worth it? That depends on your goals, risk tolerance, and trading style. If you're looking to make quick profits in volatile markets, then swing trading may be a good fit for you. However, if you're risk-averse or not interested in the stress of constant monitoring and decision-making, then swing trading may not be right for you. Ultimately, the best way to find out is to experiment with different strategies and see what works best for you.

A good way to experiment with swing trading strategies is with YouHodler's Multi HODL tool. Multi HODL allows you to long or short any cryptocurrency using a variety of multiplier levels. Set your margin call and take profit levels for more flexibility. Best of all, it's easy to use and convenient for all experience levels. 

The market is very volatile right now so use Multi HODL to activate your crypto and capitalize on this volatility. Every swing is a change to profit.

About the Author
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The YouHodler Team is the collective mind of the platform. It's a hive of creativity and diversity in the form of one singular blog author. We are united as one.

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