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Crypto Day Traders vs. Crypto Swing Traders

There are different ways to trade cryptocurrencies. While some traders trade in the short term, others trade in the long term. The former are called day traders while the latter are called swing traders. These are the two major types of traders and the most common methods of trading. This article compares the two categories.

We will look at the advantages and disadvantages of each method of trading. We will also try to determine which is best for which circumstances. If you wish to become a trader or just want to learn about it, let’s go ahead and dig into day and swing traders.

Day traders

Day traders are the impatient traders. They open and close several trades in one day, so they are only concerned with the most recent price changes of the cryptocurrency. Day traders close all their trades before the end of the trading day. Because they take advantage of small price changes during the day, they use a lot more capital and leverage than swing traders.

While this method of trading can be very profitable when done properly, it can also be very risky. For instance, the high leverage that day traders use can increase their profits by a large percentage, but it also amplifies their risks.

To mitigate the risks involved, day traders are usually highly skilled and experienced in trading. They also have to be on the edge of happenings in the industry to be able to predict the next direction of the market accurately. Despite all these precautionary measures, even the most experienced and skilled traders often incur significant loss in day trading.

There are two methods day traders use to make trading decisions. The first is speculation, while the second is chart analysis.

Speculation

Speculation is when a trader decides to buy or sell an asset because of the ongoing developments surrounding such an asset. As mentioned earlier, day traders stay up-to-date with the happenings on their assets of choice. Trades are then opened and closed based on such happenings.

For instance, a trader may decide to create a buy order because of a breaking news that he thinks will make the price of an asset X go up. He may also decide to open a sell order based on the news which he perceives could cause a drop in the price of the asset. Such decisions are made based on speculation. It is important to note that traders can make money trading an asset whether the price goes up or down.

Chart analysis

This is done by employing technical analysis. Day traders use several tools to accurately analyze the chart of an asset before deciding whether to trade the asset or not. Their analysis will also tell them if they should buy or sell the asset in question.

There are several tools that are used in chart analysis. They are mostly used to predict what the price of the asset is likely to do in the short term since they only trade short term changes in price. This is why every day traders must be highly skilled in market analysis using technical indicators as this is vital to the success of their trades.

Advantages of day trading

Day trading has a number of advantages. First, day traders can make a lot of money fast as trades can last for as short as a few seconds. Secondly, day traders avoid the risk of holding open positions overnight which significantly increases the risk. It also takes less time to trade so it makes it attractive to some traders.

Disadvantages

Day trading also has its disadvantages. First, it requires a large amount of capital to start, which many may not be able to afford. Secondly, day traders open and close several trades in a day and so spend more in fees and commissions. Day trading requires a close watch on the market for a significant part of the day. This makes it a full-time occupation that people with regular day jobs may not be able to sustain.

Swing traders 

This category of traders are usually considered as the opposite of day traders, but this is not entirely true. While they trade over longer periods, say days, weeks or even months, they still rely on information just like day traders in order to succeed.

The key difference between swing traders and day traders is that swing traders attempt to profit from a “swing” in the price of an asset. This can happen within or outside a single trade. They bet on a change in the price within a period of time, known as a swing. If the swing happens as they expect, they profit. Otherwise, they lose. Swings are big price changes which swing traders take advantage of, unlike day traders who take advantage of several small price changes.

Although day trading is said to be risky, there are arguments that swing traders take even greater risks. This is because they hold their positions for more than a day and there is a great risk of price changes at night after the closing of the day. Prices can change significantly between the closing of a day and the opening of another which can cause a great loss to a swing trader.

As a result, swing traders use smaller capital than day traders. However, they also use leverage in their trades even though it may increase their losses significantly.

Swing traders rely mainly on technical analysis to guide their trading decisions. They however also employ fundamental analysis to be sure that the bullish tendency of an asset is backed by the fundamentals of such an asset.

Advantages of swing trading

Traders with full-time jobs can engage in swing trading as the trades can last for days or even weeks or months. It also does not require a lot of time investment so the trader can spend time doing other things. Perhaps the most important advantage is that it requires less capital than day trading.

Disadvantages

One disadvantage of swing trading is that significant losses may be incurred overnight. Because swing traders focus mainly on one major swing at a time, they may miss other smaller price moves which they would have profit from.

Which method is better?

On which method of trading to adopt, the answer is that it depends on several factors such as the trader’s personality, how much capital you have and how much time you are willing to invest as well as the level of risk you can tolerate.

Ultimately, the best method for you wil depend on these factors and what suits you more.

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