Swing Trading vs Day Trading In Crypto:  Which Strategy Suits You The Most

Many traders are lost in this dilemma today.

They either do not properly understand the strategies for crypto trading or do not know which suits them and why. This has led to the failure of many traders, not because of bad trades but rather because they use the wrong strategies. 

Let’s get this fixed immediately.

 What is Crypto Trading?

Crypto trading is the process of buying and selling cryptocurrencies, such as Bitcoin, Ethereum, Tron, or Solana, with the intent of making profits. This is done by taking advantage of price fluctuations. 

Traders make a profit off the crypto market either by:

•  Buying assets low to sell high. This requires little or no analysis (whether fundamental or technical). It involves the trader owning crypto assets for either a short or long-term profit.
•  Or by speculating on price changes. This is a broader form of trading, which involves predicting the direction of price movement, often without owning the asset.

Here, traders use derivatives like futures to profit from the price changes of the asset. 

Unlike Investors, Crypto traders seek to make money off short-term movements of digital currencies. Crypto Investors hold these assets for a longer term until the prices appreciate greatly. 

Based on this, the world of trading offers multiple trading options and strategies, each with unique advantages, risks, reward potentials, and time commitments.  

Broadly, trading strategies are of two forms: Day trading and Swing trading. 

A proper understanding of both trading strategies can positively impact the results of your trading, as not every strategy suits every trader.

The trader’s personality, lifestyle, risk tolerance, and time commitment play crucial roles in making this choice. 

Also, understanding the market conditions that favour which strategy the most and learning the technicalities, risk management strategies, and skills required for each strategy can be a true game-changer. 

Let’s explore these strategies in detail, shall we?

Crypto Day Trading Strategy

Crypto Day Trading is the buying and selling of digital currencies such as Bitcoin, Ethereum, Ripple, or Solana within the same day. It is also known as intraday trading.

The goal of this trading strategy is to take advantage of short-term price changes of these assets, and this may involve taking multiple trades throughout the day.

Generally, traders close all positions within the same day to avoid overnight risks. Intraday trades are usually highly leveraged, which leads to the fear of liquidations or the trades going against them while they sleep. 

Day traders capitalize on the short-term price changes, and overnight trades might be harmful to such trading positions. 

Features Of Crypto Day Trading

• Time Frame: Positions are intraday (trading positions are opened and closed within a day)
• Frequency: More than one trade can be taken within the day. This helps the trader maximise gains within the day.
• Use of High leverage: Day traders maximize gains by increasing the leverage of their trades. This increases profits from the trades, and potentially, more losses could be incurred.
• Real-time Market Monitoring: This strategy demands constant chart monitoring, attention to news, and market movements throughout the trading session.
• Preference for High Liquidity Assets: Day traders usually focus on digital currencies that are very liquid - that is, crypto tokens that can easily enter and exit positions in no time.
• Demands Knowledge of Technical Analysis: According to the Oxford Dictionary, Technical analysis is a form of financial analysis that uses patterns in market data and past information to identify and predict trends and the future prices of the asset.  Day traders require a strong understanding of technical analysis, which involves chart patterns, indicators, and price action. They rely heavily on technical knowledge rather than fundamental analysis.
• Proper Risk Management: Due to the volatile nature of crypto markets, traders use stop-losses and take-profit orders on nearly every position opened.Crypto Day Traders use platforms such as Bybit, Coinbase, or Binance and tools such as TradingView to track and analyze the market. 

And, like every other strategy, there are Pros and Cons to Day Trading.

Pros of Crypto Day Trading:

• No overnight Risk: Positions are closed daily. This cuts out the chances of overnight trades.
• High Profit Potential: Skilled traders can earn significantly in a single day from multiple positions. 
• Gives the sense of being self-employed: This strategy is time-demanding as traders would have to spend a chunk of time analysing the market, monitoring their positions, and watching charts. This gives the feeling of being your boss. 

Cons of Crypto Day Trading:

• Emotionally Stressful: Constant monitoring of trade positions and charts can be emotionally and mentally exhausting. 
• Exposure to High Risks and Volatility: Intraday trading requires the use of high leverage, and this exposes the trade positions to greater risks and potentially huge losses. 
• Requires Experience and Skill: Successful day trading demands an accurate understanding of technical analysis and risk management.
• Transaction Fees: Frequent trades accumulate trading fees, which may eat into the profits, especially for exchanges that charge high fees for transactions.

What is Swing Trading? 

Swing trading, on the other hand, involves holding trades for days, weeks, or even months. It aims at identifying the market trend and holding positions in line with it for ultimate gains.

Swing traders use the knowledge of technical analysis to find entry and exit positions, but also rely on fundamental analysis, economic events, and news on the asset for their trading positions. 

The major difference between Day Trading & Swing Trading is the duration of the trade Position.

Swing traders seek long-term trends and open positions for either buying or selling at strategic price points. Unlike Day traders, they do not trade multiple positions frequently (except that they want to make a profit off short-term moves in the market), and they aim at a higher profit from each position opened. 

Features of Swing Trading:

• Time Frame: Opened trade positions can last for days or weeks.
• Frequency: Unlike day trading, the frequency of trades is reduced as most trades last for long periods.  
• Use of Low Leverage: To avoid liquidation calls, and save the trade against volatility, swing traders use lower leverage.
• Demands Both Knowledge of Technical and Fundamental Analysis: Skilled swing traders use both analysis to confirm the trend, entry and exit point. 
• Demands Moderate Activity: Swing traders are not glued to their screens all day. This makes the trading lifestyle more flexible than day trading. 

Pros of Swing Trading: 

• Less Time Demanding: Swing traders do not have to monitor their charts and positions all day.
• Higher Rewards Potential: Longer trades seem to be more rewarding.
• Lower Chances of Burnout: Swing traders seldom experience burnout from trading, as they spend less time and mental energy on trading. This is because they don’t have to make a lot of decisions.
• Flexibility: This trading strategy can allow for other commitments and jobs.

Cons of Swing Trading: 

• Emotional Strain: Holding an open position for days or weeks can be mentally and emotionally taxing. Not every trader can handle holding an open position for an extended time frame. 
• Exposure to Market Risks: Overnight trades and economic events can expose the trade to huge volatility, which can lead to unexpected losses.
• Demands Skill and Discipline: Inaccurate identification of market trends can lead to huge losses. Poor risk management and poor emotional management can lead to low profits or even losses. 

Although most swing traders focus on the major trend of the market, some traders also take counter-trend trades to make quick profits. 

Comparison Between Day Trading and Swing Trading

Who Should Choose Day Trading vs Swing Trading?

This is a major decision every trader must take to ensure sustained profitability. This decision is taken based on several factors, which will be discussed shortly.  

Both strategies are profitable, and every trader must stick with the chosen strategy. 

Different factors should be considered when choosing a trading strategy. 

These factors include:

1. Trader’s lifestyle
2. Trader’s personality
3. Trader’s time availability
4. Trader’s risk tolerance

Let’s properly look into these factors.

1. Trader’s Lifestyle: Day trading would be more convenient for those who want to make a career out of trading, or who would want to give it their full time. With this lifestyle in place, it is easier to make gains and maximize trading opportunities in the market. 

People who would love to trade but are engaged with other activities or have very serious commitments are best suited for swing trading. 

2. Trader’s Personality: Day trading would be more convenient for people who enjoy fast-paced environments, love taking quick gains, even though not much, and can handle a good amount of concentration in trading.

People who cannot focus on trading for long but can exercise patience over time to allow for long-term trades are best suited for swing trading. 

3. Trader’s time availability: Day trading is ideal for people who can commit sufficient time to trading. Making analyses, monitoring charts, and handling multiple decision-making in a day are all time-demanding. 

Swing trading can favour people with limited time, who have a job or a very serious commitment, but would want to grow their money trading cryptocurrencies.

4. Trader’s Risk Tolerance: Every trader has some level of risk appetite and what they can endure in trading. Intraday trading exposes the positions to the market’s volatility within the day, while swing trading exposes the trades to overnight risks and the impact of global news or economic events.

People who can handle quick, small gains are best suited for intraday trading, while those who can manage risk over days, not being perturbed by the short-term drawdowns or pullbacks, are best suited for swing trading.  

Tools & Resources For Both Strategies

Both trading strategies require tools and resources for effective execution.

Some of these tools are:

• Charting tools such as TradingView, MetaTrader
• Indicators such as Moving Averages (SMA, EMA), Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD)
• Technical tools for spotting major support and resistance zones
• Risk Management tools, such as Position Size Calculators
• Educational Materials such as helpful blog posts, courses, and more. 

Conclusion

Both trading strategies are great and profitable. Each strategy is well-suiting for different individuals depending on the factors which are already discussed (time availability, personality, risk tolerance & lifestyle).

Depending on the Trader’s knowledge base, trading both strategies is also possible. Some traders do both intraday and swing trading depending on the market’s condition. While focusing on the long-term trend of the market, the take quick counter-trend trades intraday.

Disclaimer: This article was written to provide guidance and understanding. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.