What are the differences between crypto day trading and swing trading? Over the years, more and more people are entering into the crypto market space making it one of the more popular trading options of financial assets, though digital.
There are different types of crypto trading but the crypto traders who want to avoid risks as much as possible, usually opt for day trading or swing trading.
If you are wondering which among these two trading options will be suitable for you, you should first know the differences between them.
There are many crypto traders who still struggle when it comes to choosing between day trading and swing trading.
Typically, they cannot decide which of the two is better and more profitable.
Well, neither they nor you need to be confused anymore because this article encompasses all the differences between these two trading options.
Though these may seem to be similar methods, there are several major differences. The primary difference between day trading and swing trading involves time.
Just as the name suggests, day trading involves a day while swing trading lasts more than a day. However, apart from this basic difference, there are several others that this article will let you know about.
This knowledge will enable you to make your choice more confidently.
9 Differences Between Crypto Day Trading and Swing Trading
Either way, both swing trading and day trading can prove to be a profitable option if only you know how to make the best use of them.
The profit amount earned will also depend on the time spent, the amount of available capital, trading psychology and style as well as the market you are trading in.
This article will help you make a choice among them depending on your trading style, risk tolerance, and preferences.
Go through the list of differences below as well as the ‘Which is better’ section so that you have a complete knowledge about these two types of crypto trading and eventually make the right choice. Here you go.
Ideally, in day trading both short and long positions are done within the same day. The people involved in day trading are called day traders and stick to their trading strategies inexorably, irrespective of the outcome of the trade.
However, day trading is not for everyone because along with a high profit potential it also brings in a lot of risks.
The trades are short and come with a high win/loss ratio. However, the profit potential can be made even higher by the traders by using leverage.
On the other hand, the swing traders or those users who are involved in swing trading typically take the market swings or fluctuations into account.
These swings typically stay for more than a day and therefore, swing trading may last much longer than day trading. Ideally, the positions of the swing traders can stay for several days, weeks, or months as well.
However, if the position stays for more than a month, then the swing trade is considered as an investment.
2. Requirements for Traders
The day traders need to be very accurate in their choice of assets, positions, and make several other calculations precisely as well.
All these attributes will help them to make the right decision quickly regarding sizing their trade volume. It will also help them in timing their entry and exit positions as well as Stop Losses.
On the other hand, the swing traders need to be more fundamentally driven and patient, unlike the day traders, since they hold their positions for a longer period of time. They need more time to analyze the market conditions and less time to trade.
3. Differences in Nature
Day trading is a lot more demanding as compared to swing trading because you will need to keep a close watch on each and every move in the market, no matter how small and insignificant it may look to you.
And, since the crypto market never sleeps, the amount of information needed to be processed by a day trader in a day can be huge.
Therefore, it will demand a lot of your time and effort from your side to create the best trading strategy. This is more like a full-time job but is quite fulfilling if done correctly.
Swing trading, on the other hand, is not that demanding. The traders need less technical analysis skills as compared to day traders.
This is because the entry points in swing trading do not need to be as precise as those in day trading and these are also not planned to be micromanaged.
The timing is not very crucial as well because the moves the swing traders aim to catch are larger. The most important aspect of swing trading is to determine the current market trend and plan their trades according to it.
However, it is more demanding in the sense that you need to have adequate knowledge about macroeconomics and fundamental research.
The approach for day trading is very fundamental. Ideally, crypto day trading will need a lot of technical overview of the specific crypto coin you want to trade with much unlike a longer form of trading.
All you need is to work properly and make the trades with extreme precision after doing a lot of calculations.
As for swing trading, it can be fun and you can take it as your part-time job because it will not need as much time as day trading. However, it can be profitable only when you follow the right approach and know the importance of Stop Loss.
This is because the crypto market never sleeps but you do. If you do not utilize the Stop Loss properly, you may lose most, if not all, of your crypto portfolio while you sleep.
This is a specific concern and a vulnerability that needs to be annulled with a proper trading strategy that comes with a lot of defensive measures.
5. Profit and Loss Amount
In swing trading, which is considered to be a medium-paced form of crypto trading, the profits and losses accumulate much slowly.
This is because in this process the trades have a much lower frequency than day trading. However, there are a few swing trades that can result in quick returns.
Day trading, on the other hand, offers much faster compounding returns which attract more traders. They not only can buy and sell assets in the same day to earn profits but also do so several times in a day to make it even higher.
Typically, most day traders follow the 1% risk rule in which they do not risk more than 1% of their crypto portfolio to make a single trade.
6. Time Taken
As far as the time taken is concerned, both these forms of crypto trading need time but it is usually a lot more as far as day trading is concerned. Ideally, a day trader trades for two hours in a day at the least.
This is excluding the time needed for reviewing the charts and trading signals and the preparation time. When added, it will come to at least three to four hours a day of computer work.
When you make more trades, it is needless to say that the time required to put in goes up significantly making it a full-time job.
Swing trading, on the other hand, takes a lot less time as far as active trading is considered. If you trade off a daily chart, it will take about 45 minutes or even less than that to go through the updates of the day and find trades based on the orders on existing positions.
And, most importantly, this activity need not be required on a daily basis. On the other hand, if you make trades lasting for a week or month, the time required is even less to look for the trades and updates of the week, which may be as little as an hour a week or less.
7. How to Trade
If you are into swing trading, to start it, you will need to create an account with a brokerage and fund it first. Once it is done, you are ready to place your trade on the platform.
On the other hand, if you wish to do day trading, you will first need to make sure that your system is equipped with the latest technology and software. This will make your trading activities much easier.
Also, you will need to make sure that you can automate a few processes so that you can make your trades more profitable and do not miss out on any given opportunity.
Then, just like in swing trading, you will need to set up an account with a broker, follow the funding process and start trading.
Just like other things, day trading and swing trading both come with their share of pros and cons.
As for the advantages in day trading, the list includes:
- It allows you to make several trades in a day
- It allows you to make multiple smaller profits and losses and
- Your positions can last anywhere from one hour to a couple of hours to days
However, to enjoy all these advantages, you should consider it as your full-time job and you should also make the best use of the buy and sell signals in the short term. In addition to that, you should use some of the best trading tools and rely on the state-of-the-art trading platforms.
In comparison, the advantages in swing trading are:
- It allows you to make multiple trades in a week
- Your positions can last anywhere from a day to weeks and a month
- It allows you to take it up as your part-time job and
- It allows you to make fewer but more significant profits or losses.
Once again, in order to enjoy the benefits of swing trading, you should utilize the momentum indicators and the market trends. You will also need to make use of a standard brokerage account. and
However, alongside the pros of day trading, it is better to know a few downsides of it as well. Day trading can be really stressful because you will need to keep a constant eye on the price fluctuations of the extremely volatile Altcoins.
You will also need to master a few skills and that will take a long time. If you do not, the mistakes made in the process will cost you a lot.
And, when you take more trades, do remember that you will need to pay commissions on each of them which may add up to a considerable amount.
On the other hand, if you look at the downsides of swing trading, it is quite riskier than holding because the volatile nature of the Altcoins can result in losing all your money in quick time if you are not cautious with your trades.
Moreover, more often than not, you will miss out on a few long-term opportunities while swing trading in order to take the advantage of the market movements in the short term.
Which is Better – Crypto Day Trading or Swing Trading?
It is quite difficult to say which among swing trading and day trading is better because every trader has a different need and style of trading.
Therefore, one that is suitable for one trader may not be apt for you. It is all a matter of personal choice and preference.
Typically, you should go for a trading style in crypto according to your risk appetite and how you wish to make your trades.
Going through the different points of difference between day trading and swing trading summarized for you above, it will surely be easy for you to make a choice between them.
If not, here are a few more things that will help you in this regard.
If you are highly analytical and have enough time to do the necessary research and if you do not want to hold your positions for a long time, day trading is the right option for you.
On the other hand, if you rely more on the basics of crypto trading and do not believe in the chart and graphics for a proper price analysis and think the fundamental analysis is more important, swing trading would be a good fit for you.
However, that is all as far as the choice is concerned. In order to make your trading strategies profitable, you will need to use all the available tools that will increase the profit potential and minimize the risks involved in crypto trading.
The basic requirement for a day trader is to be extremely analytical and be able to handle the stress involved in it quite well.
It is only then the trading strategy will be superior and more profitable to swing trading.
In addition to that, day trading also needs quite a bit of knowledge regarding the crypto market and the ways to analyze them on a frequent basis to determine the current trends and correlations.
The crypto markets for day trading can be exceptionally lucrative because the market as well as the price of the crypto assets seems to fluctuate constantly.
Therefore, you can make quite a lot of profit if you can judge the right moments to buy and sell your crypto assets.
The best thing about day trading is that there is no set time for a trader to operate. This means that you or anybody can trade at any time.
Ideally, according to the crypto experts, day trading is a better option to choose for those traders who have the three D’s, namely:
- Decisiveness and
As it is evident from the article, the profit potential for swing trading is much higher, once again, due to the longer duration of the trade.
However, swing trading may not provide you with as many opportunities as provided by the day trading option.
Therefore, in order to make sure that you choose the best trading option, here are a few specific factors that you should consider.
This will help you to match your choice with your trading style.
First, consider the level of stress you can take every day. If your stress tolerance level is high, you can go for day trading, or else stick to swing trading.
Then, consider whether or not you have the time in your hand to keep up with the fast pace of day trading.
If you cannot devote enough time every day and want more freedom, day trading is not your cup of tea.
You should also have sustained focus for a longer period of time in order to make your day trades successful and more productive.
This is very important because day trading will provide you with a much shorter window of opportunity to make profits.
If you cannot manage it, go for swing trading which also needs focus but not for a long period since entering and exiting trades are typically made after long intervals.
Also, pick the right assets for swing trading after proper and prolonged fundamental and technical analysis and tally with the positions you wish to take.
This means that, if you opt for a long position, you should choose a crypto asset that is known to have a reasonably high price valuation and earning potential along with a reliable balance sheet.
In order to make your choice of crypto assets and better opportunities, you should use different indicators and support and resistance levels as a part of your technical analysis when you judge the momentum and volume of the assets.
And, since day trading is not much about investment, it is enough to know the volume and momentum of the asset you wish to trade with.
This will enable you to move in and out of a trade quickly. Though technical analysis is also important for day trading you can restrict it to using only those indicators that will allow you to spot the trends and changes in prices of the crypto assets as and when they occur.
Therefore, it can be said that day trading and swing trading both come with their significant advantages and drawbacks.
None of these can be termed as better than the other and you should choose one that works best according to your trading skills, lifestyle, and preferences.
Both these options are quite good to go for but you should know the differences between them to make the right choice. Articles like this will help you in that matter and help in picking one based on your trading personality.