Trading may be the side passion you do in your free time, it may be your part-time job or you can turn it into a full-time job and go all in on it.
Whatever you chose to do, think twice before because every opportunity in life comes with the risk.
Yeah, we are traders that try to help other traders, but it is you that will be trading so make sure that you are able to organize yourself and your time and that you will be able to give enough time for trading.
We would like to point out two main type of traders: day trader and swing trader.
What is a swing trader?
A swing trader is the one that focuses on the general market trend.
He is looking at higher time frames direction and trade with that.
He doesn’t care too much about intraday price movement.
All he cares is the picture bigger time frames are showing: monthly, weekly and daily.
On monthly and weekly, he marks important price levels that were areas of significant interest in the past.
Once areas are marked, he switches to a daily time frame to look for an entry setup.
He is usually looking for trend continuation signs.
There are a lot of traders that will, of course, play trend reversal trades but the overall picture is that the majority of successful traders is trading with the trend.
Once daily time frame develops an entry setup, he switches to H4 time frame to look for confirmation because if he waits for confirmation on the daily time frame, he may be late.
So the lowest time frame he is looking at is the H4 time frame.
This was the way that successful swing traders trade.
What unsuccessful traders do couldn’t fit into the whole this course.
They buy when they want, sell when they are scary, buying when greed kicks in and so on and on.
What is a day trader?
The day trader is trying to focus on intraday price action.
Day trading requires from you full focus and that’s why it is usually your full-time occupation.
One group for day traders is not enough because there are those that will open 10-20 trades a day but also those that open 3-10 trades a week.
Both of these two are monitoring the intraday action closely but they have different methodology and perception they use.
The time frames they use for trend direction are weekly and daily.
They use H4 and H1 for trade setup and H1 and M15 for entry confirmation.
The time frame choice has to be your own.
If you are the type of person that likes to trade with confirmation, then use a higher time frame.
In swing trading, then you should at least use H4 for entry confirmation.
If that is daily trading, H1 is the time frame you should consider using.
If you like more risk and trading with weaker confirmation then you can look for confirmation on lower time frames.
Things you should not do is to turn day trade into swing trade and vice versa.
What traders without a plan do is very naive.
They will turn losing trade into the swing and let market turn in their direction while they will close winning trade too early and make it a day trade.
If it is meant to be swing trade, let it be.
The amount you will lose is defined by the risk management and position sizing, not the number of pips you are down or % in the crypto world.
If a day trade went wrong, cut the loss at the area where you put your stop loss.
Don’t give it more space because you were invalidated and maybe the price is starting a new trend, different from the trend you were trading.
Are you a part-time or full-time trader is the first question you have to ask yourself.
The swing trading gives you the ability to have more time for yourself and your other occupations (your family, your business).
To be a swing trader, you have to learn how to be patient.
You can get 2-3 trade opportunity per month on a currency pair.
Some people will think it is too low, but that’s just one pair.
There are hundreds of different trading pairs, and if you manage to follow 5-7, you can get around 20 up to 30 opportunities per month.
This is a less stressful way of trading because it usually gives you enough time to find a solution and act to the new market environment.
By focusing on larger picture, your stop loss, as well as target, will be usually wider.
Because of that, you will be paying lower fees.
The first clear reason is entering less trades will lead you to pay less times fees.
The more trades you open, the more fees you pay because on every opening you will pay the fee.
We will use an example to represent the second reason.
As a swing trader, your stop loss will be wider.
On the other side, as an intraday trader, you will tend to use tight stop losses.
You buy a coin at $100.
As a day trader, you put stop loss at $95 and as a swing trader, you will put stop loss at $80.
The fees you pay for the opening position is the same.
Where is the difference?
Do you remember what the slippage was?
The slippage is the difference between the price you put your stop at and the price it gets executed.
Let’s assume that you got $2 slippage in both situations.
In the case of tight stop loss, instead of executing at $95, it will be filled at $93.
So, you lost 40% more than you planned to lose just because of slippage which is not your fault but simply lack of liquidity in the market that often happens.
If you were using swing stop loss, instead of executing at $80, it would be executed at $78.
In that case, you will lose 10% more than you planned to lose.
You were slipped for the same dollar distance but your loss was 30% bigger just because you were using a tighter stop loss.
Day trading requires your full focus because confirmation will happen on m15 time frame or at h1 and you have to be there and monitor it while as a swing trader, your confirmation will happen one H4 or even on a daily time frame which means you won’t be forced to check chart every 5 minutes.
Being an intraday trader will increase your free time to have side actives because you will be trading or monitoring the trades most of the time.
There is a myth that swing traders are opening just a couple of trades per month while day traders can open why more trades.
The number of trades is irrelevant.
The focus should be the number of quality setups. If that’s 3 a week, then it is 3 trades a week.
Forcing trades is not the way trading should be done.
As a swing trader at the beginning you can expect to get 2-3 trade opportunities in a month per trading pair.
Even if that sounds too little and not enough, as a swing trader you can monitor 5-7 trading pairs easily since you are watching monthly, weekly and daily price action and looking for setups on a daily time frames.
So, in a month you can easily open 20-30 trades.
On the other side, as a day trader you won’t be able to monitor quality more than 2-3 pairs at the same time.
Considering the fact that you won’t get a setup every single day because the market could go sideways for a couple of days and what you end up trading is again around 30-40 trades per month which is not way bigger than the number of trades swing trader will have.
If you try to force more, it usually doesn’t end well.
The extreme version of day trader who opens 10+ trades a day is usually done by professionals and they almost always use limit order which make them pay lower fees and that’s the way they trade.
They have the plane they follow and they do it for years.
So, day trading can be very profitable but if done correctly.
At the end, both swing and day traders are able to open similar number of trades per month.
If you take in observation the fact that as a swing trader you are less affected by slippage and have more time for your family, other business, back testing new strategies or reading about something you like, why would you want to be an intraday trader?
The reason why day trading is popular is that people think the more they trade the more they make.
That’s the mindset they bring from a 9-5 lifestyle.
Opening more trades will do nothing but make you pay more fees and monitor attached for the whole day which will enable you to focus on other things.
If you have time, do not open more trades but rather study the charts deeply and explore new pairs that you can add to your portfolio.
The trading results will show the work you have done in the background not the number of trades you opened.
Especially for beginners, it is much better to start as a swing trader.
It will give you enough time to learn more while you are looking for new trading opportunities.
It will be a slow but steady growth for both your skills and knowledge and your account.
Once the trade is closed, you will have enough time to analyze the results and what did or didn’t work.
If you find yourself able to trade more, change it a little bit by looking for trend direction on monthly, weekly and daily, look for trade setups on daily or h4 and confirmation on h4 and h1.
This will give you a little bit more trading opportunities but this is the lowest time frame you should go.
Monitoring price action on 5m time frame will do nothing but ruin your day.
These time frames are for trading algorithms and bots and if you can beat them, then try it.
It is better to look for general market direction and trade with that and avoid fighting against artificial trading tools on lower time frames.
Milos is an independent trader, with a background in journalism and publishing. Nomadic by nature, he’s lived in four different countries this decade. He’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives. Milos got into Bitcoin while completing his degree and hasn’t looked back since, writing about anything crypto-related. He is the co-founder of the Cryptoaims and he has a strong passion to educate people about this revolutionary technology.