Best indicators for swing trading are a trending topic. Swing trading has been on the agenda of many crypto traders recently. And rightfully so! It is an efficient crypto trading method with lots of potential. Now, let’s talk about how to take your game to the next level. Every job requires the right tools. In trading cryptocurrency, these tools are trading indicators. Keep reading to find out what are the best indicators for swing trading in 2020!
Swing Trading vs Day Trading
Let’s start with some definitions. Are you new to trading? If so, the first step is to understand the concepts.
What is Day Trading
Trading means buying and selling assets with the aim of making a profit. Institutional trading looks at buying and selling stock, shares and currencies. Trading cryptocurrencies means buying and selling digital assets. The purpose remains the same in both worlds – aiming at returning a profit.
So, when does trading become day trading? This is usually determined by the time that a trader holds an asset. Day trading means buying and selling assets within a very short timeframe. This could be anything from a few seconds to a few hours. It qualifies as long as the asset trades within the same day. Hence, having the name day trading cryptocurrency.
Are you interested in learning more about day trading cryptocurrency? Check out our comprehensive guide on this topic!
How Does Swing Trading Differ?
Now that you are up to date with day trading, let’s move on! As you know, we are here to learn about the best indicators for swing trading. So, what is the difference between day trading and swing trading?
The key indicator between the two is time. Swing trading is also fast paced. Yet, trades are slightly longer than with day trading. Swing trading has a slower pace and gives traders more time to understand the process. This means more opportunities for research before executing trades. It is a popular method for traders who are just getting started. Swing trading will help you get used to a fast paced trading environment. Traders can build on their skills during this process. So, after spending some time swing trading, you can move on to day trading.
How Does it Work?
Day trading usually means holding an asset for less than one day. Swing trading has somewhat longer timelines. For instance, a trader will hold onto assets for a few days to a week. What is the biggest difference in process compared to day trading? Well, the longer you hold a trade, the larger the profit potential.
Best Indicators for Swing Trading – an Overview
Swing trading is fast paced. So, this means you have limited time for making trading decisions. This requires alertness. Luckily, you can assign much of this work to technology. Using the right types of technical indicators will make trading much easier for you.
What are Trading Indicators
Trading indicators are tools used for increasing trading efficiency. They help traders analyze the price direction of an asset. Trading indicators are helpful in both long and short term price analysis. So, you can look at trading indicators as calculations. They signal the events that are bound to happen in the trading market.
Are you looking for an in-depth introduction into trading indicators? Check out our blog post for a detailed overview!
Best Indicators for Swing Trading – which to choose?
Trading indicators can measure a wide array of aspects. For example, price movement, volume, momentum and other factors. There are tons of trading indicators available. Traders choose them based on their own preference and experience. So, what are the best indicators for swing trading? Check out our Top 3 picks!
1. Moving Averages
Let’s start from the most well known group. Moving averages are a popular category of trading indicators. This includes several indicators that vary on complexity and purpose. Moving averages derive from historic prices. In other words, they filter out unnecessary information from short-term price fluctuations. This helps to smooth out price action and get a better overview.
Moving averages focus on trend-following. Also, they help determine support and resistance levels. As mentioned before, there are many variations available. Simple Moving Average (SMA) takes the arithmetic mean of a set of prices over a given time. Exponential moving averages (EMA) use a weighted average. This gives higher importance to more recent days. Moving Average Convergence Divergence (MACD) monitors the relationship between two moving averages. A common MACD calculation subtracts a 26-day EMA from a 12-day EMA.
So, how to read moving averages? Well, if the price crosses the moving average line, it signals an uptrend. For instance, let’s look at the MACD. if the 12 day EMA is above the 26 day EMA, it suggests an uptrend. This means a momentum is rising. But if the longer term moving average is above the short term average, the momentum is passing. So, you should sell.
Some traders also follow the “signal” line, aka the 9 days EMA. This helps traders identify the buy/sell decisions. If the MACD moves above the signal line, it suggests a bullish run. But when the line sees MACD running below it, we can expect bearish movement.
This is a very basic but efficient trading indicator. Volume is often missing from the list of best trading indicators for swing trading. Yet, it shouldn’t be. It is easy to use for beginners and can bring noticeable gains. Volume is particularly important when analyzing trends.
Volume patterns help traders understand the strengths behind price movements. For instance, rising markets with increasing volume are usually strong. But when volumes decrease, trends are also facing a downturn. In conclusion, volume is one of the key indicators in technical analysis.
3. Relative Strength Index
Relative Strength Index (RSI) is a popular buzzword among traders. This indicator aims to quantify the gains and losses of an asset over a fixed period of time. The relative strength index fits both beginners and pro traders. Its use cases are quite universal.
So, why is the RSI a good fit for swing trading? Well, it provides you with the information for timing your market entry. It is beneficial for investigating short signals. The RSI gives better insights for this than other indicators. So, traders can tell if an asset is overbought or oversold.
Are you interested in learning more about the best technical indicators for swing trading? Have a look at our comprehensive guide on trading indicators. This will help you find out how to apply these indicators and how to analyze their scores.
Now that you know all about the best indicators for swing trading, it’s time for some practice! Start improving your trading skills by heading over to the CoinMetro crypto exchange! In case you have any questions, our support team is here to help 24/7.