Day trading or Swing trading? Which one is more profitable? Which one of them is more suitable for beginners and which one is better for seasoned traders?
There are quite a few questions that might arise when picking either one strategy or a mix of these strategies.
In this article, we will take a look at both of these strategies, their key elements and try to understand their pros and cons. So let’s dive in!
In a typical stock market – from which the term “day trading” actually was carried out – a day trader typically gets up to start their trading just as the market opens; however, since we’re talking about crypto, there are some peculiarities – because as we all know it, crypto never sleeps.
Nevertheless, the term “day trader” is still used in the cryptocurrency industry, which refers to several important characteristics.
When someone talks about day trading in cryptocurrencies, they are referring to a method that is different from long-term trades like buy and hold strategies. Much like its name implies, day trading involves making dozens of trades in a single day. The goal of a day trader is to make small profits on a large number of trades and limiting losses on failed trades. Day traders aim to profit from even the smallest price changes and market volatility.
There is a misconception, however, especially among inexperienced traders, that day trading and scalping are pretty much the same thing. In fact, that is not correct.
Unlike day trading, scalping is one of the most difficult trading strategies because it requires traders to use the shortest time frames, which puts them under a lot of pressure.
Scalpers open and close a number of positions throughout a single day in an effort to profit on minor fluctuations in price.
Day traders might open no more than just several positions per day because their focus is on the best opportunities, as opposed to scalpers, who can place dozens of trades in a single day under the assumption that insignificant price changes are easier to profit from.
Day traders, as opposed to scalpers, typically hold positions for several hours but less than one full trading day.
Another strategy that is popular among groups of traders attempting to capture gains is swing trading. This strategy involves leveraging a position, holding it for a short period of time while waiting for price swings, and then profiting off the outcome of the position.
Since the time period usually isn’t fixed, it can vary anywhere from days to weeks and even months. Most swing traders end up in this bracket as they rely on short, secondary trends.
Swing traders can either buy or sell a specific cryptocurrency and wait for the profit. Because of this, trading is more passive and not dependent on a fixed time schedule, and thus, unlike day traders, swing traders might not end up making crypto trading their full-time job.
Cryptocurrencies’ prices do not move in a linear trend but rather are punctuated by instances of short-term price pullbacks that are called price swings. Swing traders merely monitor the crypto market and look for price swings. By examining historical patterns, keeping an eye on the news, or following current affairs, one can predict the price point and timing of the swing. When a trader is certain of their position, they will hold it until the prescribed end of the swing.
Swing traders enter and exit the market sporadically based on current opportunities. Since their positions are open longer than those of day traders, they often use both fundamental and technical analysis.
The main challenge for all swing trading strategies is identifying when to enter and exit a trade, so using technical indicators such as RSI, MACD or Bollinger Bands is vital when it comes to catching the right trend.
Since we’ve covered both day trading and swing trading strategies, let’s highlight their key differences.
Perhaps the most notable difference between these two strategies is the holding period. A day trader can hold for as little as a few minutes or as long as a few hours without closing the deal. However, this limit must never go beyond the market’s opening and closing hours.
A swing trader, on the other hand, is bound by the length of the trend or swing. They may have to hold their positions for days or weeks.
The next difference between these two strategies lies in the frequency of trades. Day traders can make numerous trades each day, frequently involving different assets. This strategy is intended to profit from small price fluctuations throughout the day.
On the other hand, swing traders typically have just a few deals that can be open for several weeks.
Day traders are unlikely to be impacted by systemic risks, since their trades almost never last longer than a few minutes or even seconds and are never open overnight.
In contrast to day traders, swing traders are subject to systemic risks because their trades can be left open for days or even weeks. During this period, any kind of geopolitical event or simple FUD could significantly impact the asset’s price.
Unless you use automated crypto trading bots, day trading is like a full-time job that requires extra commitment, patience and time. Day traders have to monitor their trades in real time to look for best opportunities to buy and sell their assets.
Swing traders are not burdened by the need to regularly monitor their trades. They don’t have to be concerned about short-term market volatility because they hold their positions for a period of time ranging from a few days to weeks. Most commonly, swing traders simply set their profit as well as stop loss targets and only check them up occasionally.
Each of these two strategies entails particular dangers and yields particular benefits.
Day traders execute multiple trades in a single day, which provides a route to potential short-term profits.
Swing traders, on the other hand, hold onto their positions for longer periods of time and potentially have a better chance of making more profit from their trading deals since crypto’s price commonly goes higher in the long run than during one day.
Day trading is a more adrenaline-filled, fast-paced trading strategy, while swing trading, on the other hand, is a somewhat more methodical and hasty approach.
So picking either of these strategies will depend not only on your profit goals but also on your personality and the amount of time you are willing to spend on your crypto trading activities.
FAQ
What is day trading?
When someone talks about day trading in cryptocurrencies, they are referring to a method that is different from long-term trades like buy and hold strategies. Much like its name implies, day trading involves making dozens of trades in a single day.
What is swing trading?
Another strategy that is popular among groups of traders attempting to capture gains is swing trading. This strategy involves leveraging a position, holding it for a short period of time while waiting for price swings, and then profiting off the outcome of the position.
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