Best Indicator for Crypto Swing Trading

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Learn to use the best indicator for crypto swing trading. Many crypto traders are using technical indicators to find the best market entries.

Swing trading crypto can be a real bummer if you don’t follow some basic rules. Also, to be consistent and profitable, it is necessary that you should be very patient and can handle things when the markets suddenly turn against you. Trust me on this, it will.

The cryptocurrency market is still in its infancy and this young market lacks proper regulation and sometimes proper trading volumes. How do you survive and be profitable when trading crypto in this volatile market?

I believe trading crypto can be profitable by following a trading plan and using technical indicators as a solid tool. Consequently, for trading crypto successfully without getting REKT, it’s a must to use technical indicators correctly. Finally, if you are new to crypto trading and want to turn your profits to the next level, this article can help you realize it. Additionally, it explains the most-used technical indicators when swing trading crypto.

Finally, I want to note that this article is mentioned for educational purposes only. All content written is based on personal experience as a crypto enthusiast.

What Are Technical Indicators

Technical indicators are tools used to measure and interpret market behavior. They are often used by investors and traders to assist them. For instance, to trade timing or to alert them to new trends; whether prices will be going up, down, or sideways. Technical indicators are created using mathematical calculations of historical prices. Additionally, the trading volume of the particular asset (or cryptocurrency), in a bid to predict the market trend.

When trading in shorter timeframes, technical indicators are necessary because they are very precise in short-term price movements. Because of this, most crypto traders are using them daily or when swing trading cryptocurrency.

How Does Crypto Swing Trading Work?

Usually, when swing trading crypto you are expecting a trend reversal and are looking for a good moment to take a position in the markets. For instance, if the market has been down-trending for several days in a row, it could be a good moment to enter a long position. Also, crypto swing trading positions are usually held overnight and can stay open for days or weeks.

Traders willing to hold on to their positions for several days are subject to market volatility and can suffer from risk. However, if you are in a good position you can earn very high profits.

Swing trading is based on the concept that price retracement is a common phenomenon in the cryptocurrency market. When a price moves up and down, it’s known as a swing. In general, technical indicators are often used to help swing traders identify entry and exit points for their positions.

Crypto Swing Trading: 3 Indicators You Can Use

Next, I’ll introduce you to some popular technical indicators that can be very useful if you want to start swing trading crypto.



Indicator 1: Moving Averages

First of all, the moving average of a crypto asset can be seen as a trend-following indicator. This technical indicator tells you about the price level of a coin based on its previous prices. Additionally, the moving average is calculated over a certain number of fixed time intervals. Time intervals can be seen as common periods where the 50-day and 200-day moving averages are mostly used.

How To Interpret The Moving Average

The moving average can be graphed as a line on the price chart of a crypto trading pair(ETH/USDT). There are two types of moving averages, the simple moving average (“SMA”) and the exponential moving average (“EMA”).

Firstly, the SMA is calculated using an average of the previous prices divided by the number of time periods and therefore provides the average price data. Second, the EMA is calculated using the SMA but with a weighted average that favors more recent prices.

Moving Averages: 50 Day vs. 200 Day MA
Moving Averages: 50 Day vs. 200 Day MA. Source: Fxpro.com

The Exponential Moving Average(EMA) Explained

The Exponential Moving Average (EMA) is a technical indicator used in trading, especially by swing traders, to help them understand the trend direction of a cryptocurrency like Bitcoin. It’s a bit more responsive to recent price changes compared to a Simple Moving Average (SMA).

Here’s a simple explanation of how it works and how a crypto swing trader can use it:

  1. Calculation – The EMA gives more weight to recent prices. To calculate it, you take the latest Bitcoin price, apply a percentage of that price to the EMA (the percentage depends on the chosen time period, e.g., 10%, 20%, etc.), and then add it to the previous EMA value. This process is repeated for each new price point.
  2. Trend Identification – Swing traders use EMAs to identify trends. When the current Bitcoin price is above the EMA, it suggests an upward (bullish) trend. Conversely, when the price is below the EMA, it indicates a downward (bearish) trend.
  3. Entry and Exit Points – Swing traders can use crossovers between different EMAs to make trading decisions. For instance, when a shorter-term EMA (e.g., 10-day) crosses above a longer-term EMA (e.g., 50-day), it may be seen as a buy signal, suggesting an uptrend. On the flip side, if the short-term EMA crosses below the long-term EMA, it might be a sell signal, indicating a potential downtrend.
  4. Confirmation – EMAs can also help confirm the strength of a trend. If the gap between the two EMAs widens, it suggests a strong trend in that direction. Conversely, a narrowing gap could indicate a weakening trend or potential reversal.

In this manner, the main difference between the SMA and EMA is when calculating EMA, recent price data will affect the moving average more. As a result, the older price date will have less impact on the calculations.

Indicator 2: Fibonacci Retracement

Another important crypto swing trading indicator is the Fibonacci retracement. Particularly, Fibonacci was a famous mathematician born way back in the 12th century! This scientist hacked the ‘secret code of life’ by discovering this very famous sequence of numbers.

It turns out that every object in our dimension follows this rule. How does this sequence go?

The famous sequence of Fibonacci goes like this: Each number in the sequence is the sum of the two numbers preceding it. So, the sequence goes 0,1,1,2,3,5,8,13,21,34 and so on. Very interesting, but what has this sequence to do with trading?

When crypto trading, the total market seems to follow a certain pattern when going up or down which is called the Fibonacci Retracement. This technical indicator uses horizontal lines that divide the distance between two extreme points on the price chart according to the Fibonacci ratios: 23.6%, 38.2%, 50%, 61.8%, and 100%.

How To Draw Fibonacci Lines

Fibonacci lines can be best drawn by identifying the key retracement points.

  1. Identifying the highest and lowest price in the time frame that you are interested to analyze
  2. Drawing horizontal lines at each of these price levels
  3. Divide the distance between those lines by the Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%, and 100%)
  4. Draw a horizontal line at each level identical to point 2

Fibonacci Retracement Lines are used to identify support and resistance levels. The support zone is where cryptocurrency prices do not fall below over some time due to a convergence of demand. Conversely, resistance levels are price levels where an uptrend in cryptocurrency prices faces resistance.

Fibonancci sequence ratios

Once the Fibonacci retracement lines are identified they can be used to enter or exit for a trade. When the price of a cryptocurrency approaches the retracement lines, there is a possibility that the price of a cryptocurrency will either bounce off the line or cross the line to reach the next support or resistance level.

Indicator 3: RSI Technical Indicator

Finally, the last indicator for crypto swing trading is called the RSI technical indicator. When it comes to analyzing charts with crypto trading, RSI as an indicator is very popular. This technical indicator is very powerful once a trader wants to know the actual momentum when trading. The RSI is determined with a 2-step calculation shown below.

RSI Indicator: Overbought vs. Oversold
RSI Indicator: Overbought vs. Oversold

Secondly, this technical indicator has also magnitude up(70) and down(30) levels. An RSI value of 70 and above indicates that the cryptocurrency is becoming overbought, signaling a negative correction in the near term where prices will adjust downwards. Conversely, an RSI value of 30 and below indicates that the cryptocurrency is becoming oversold and suggests an impending positive correction. How to visualize this?

Conclusion: What is The Best Indicator For Crypto Swing Trading?

In this article, I have explained to you the most useful technical indicators that can be a great help when swing trading crypto. To find your best technical indicator it’s good to start with the following:

  • Moving Averages(Best indicator for trading an up or down trend)
  • Fibonacci Retracement(Best indicator for identifying certain price levels)
  • RSI(Indicator that helps you track momentum)


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