Are you on the lookout for a trading strategy you can use to benefit from bitcoin’s short-term price movements? If so, you might consider a technique called swing trading.
Swing Trading Basics
This approach, which involves holding positions for as little as overnight and for as long as several weeks, is a great way to take advantage of trends in the market.
If you are looking for further clarification on exactly what swing trading is, Sebastian Limeres, CEO of RealEstateCo.in, provided a straightforward breakdown, stating:
“Traders usually group themselves into two types of investors: day traders and swing traders. Day traders by definition will not hold positions overnight, so they sell before markets close.Alternatively, “swing traders are those who identify “swings” in different positions that usually happen over short periods of time.”
Swing Trading ‘A Good Approach’
When polled by Bitcoin Market Journal, several market analysts spoke in favor of using swing trading for bitcoin.
“I think swing trading is a good approach for [bitcoin] trading,” said Petar Zivkovski, COO of leveraged digital currency platform Whaleclub. “It is mature enough to not fluctuate too randomly and the trends are quite apparent over a few days or weeks.”
Arthur Hayes, co-founder and CEO of BitMEX, offered similar input, stating that bitcoin is volatile enough to support swing trading, as well as many other trading strategies.
Tips for Swing Trading
As for specific tips, analysts offered a handful of suggestions. Investors who are new to swing trading might leverage these suggestions to obtain better results.
Embrace Flexibility. Limeres notes that one major benefit of swing trading is that it offers traders flexibility. Investors looking to trade part-time instead of full-time may find swing trading appealing, as this approach does not require constantly monitoring one’s positions.
Follow The Trend. Investors who leverage swing trading should always trade in the direction of the weekly or monthly trend, as doing so will increase their chances of making profitable trades, notes Zivkovski.
Monitor The News. Following the news cycle is crucial to swing trading. Sean Walsh, a partner in Redwood City Ventures, emphasized that when looking at time frames between one and three weeks, bitcoin prices appear to be influenced largely by the news – for example, regulatory announcements – and the subsequent market activity.
Manage Risk. In addition to following these guidelines, swing traders should engage in careful risk management. “I’d say the most important aspect of [bitcoin] trading is loss limitation, meaning to cut losses quickly while swing trading, because sharp price declines can liquidate your account,” says Zivkovski.
Summing It Up
Swing trading can be very helpful, providing you with greater flexibility and an opportunity to profit from short-term price trends. To maximize your chances of success, be sure to follow simple strategies like following trends, paying close attention to the latest news developments and managing risk effectively.
Since bitcoin trading can be a complex endeavor, be sure to conduct significant due diligence before making any trades. For more valuable information about bitcoin investment strategies, subscribe to Bitcoin Market Journal.