This article explains what the best strategy is for cryptocurrency swing trading. Also, some helpful tools are being discussed.
If you have a strong stomach and are looking for a more risky trading strategy, you should definitely try the cryptocurrency markets! Although these markets are still in its infancy and have witnessed a lot of struggles, it’s has become clear now that after a decade the cryptocurrency markets are here to stay. Maybe even better, so will the volatility!
Like to take a risk and are more interested in trading instead of HODLING? Maybe you should try to implement a cryptocurrency swing trading strategy.
What is the definition of Cryptocurrency Swing Trading
Whether you want to start trading in the cryptocurrency or stock markets, when it comes to swing trading, the strategy should be the same. For a ‘swing trader’ the number one guide to follow is the technical analysis. Moreover, for a swing trader, the overall trend is very important. To indicate a trend in a certain direction(up or down), the trader recognizes support and resistance levels in a chart of a certain asset. It’s up to the trader to decide if he or she wants to go ‘long’ or ‘short’.
What are the benefits of Swing Trading
If you can go to sleep without the need to worry about open positions, swing trading cryptocurrency allows you to have an actual life without the need to stay at your laptop at all times. Participating in family life with kids or spending time with friends makes you a much happier person in general. This is a big benefit.
Also, with the patience and discipline to hold on to certain positions at bigger timeframes the rewards will be much bigger. As a matter of fact, cryptocurrency markets are famous for their volatile nature and daily price swings at 5 to 10% aren’t an exception. Additionally, double-digit gains over a few days are within close reach. So how to be a profitable cryptocurrency swing trader? The answer is very simple: Buy low, sell high.
This sounds very simple, but many cryptocurrency traders have to struggle with this. So how to do this?
How to be profitable when Swing Trading Cryptocurrencies
Like I mentioned above, patience and discipline are habits you need to embrace when entering the world of cryptocurrency trading. Moreover, when trading the volatile cryptocurrency markets you need to have a clear mind at all times. As a result, you will be able to handle all the FUD which continues being smashed into the markets.
What is FUD all about
FUD is an acronym for fear, uncertainty and doubt. It is a marketing term that is often used to cast a shadow over a competitor’s product when your own is unable to compete.
How to handle the FUD
Currently, the total cryptocurrency market exists of a staggering 2467 currencies and 20124 different markets. Also, coupled with a fully deregulated market without central authority, brings project scams and exchange hacks as ‘normal events’ cryptocurrency traders has to deal with. How to handle these FUD events and stick to your plan as a cryptocurrency swing trader?
In my opinion there are two things you can do:
- It’s very important to have a plan and that you stick to it at all times. Moreover, before developing a strategy, it’s important that your mind is clear without emotional things or other things going on that distracts you.
- Work with targets. If you are able to indicate where resistance and support zones are use them to set buy or sell orders.
If these two rules are followed, you will likely have dry powder (excess bitcoin) to buy the altcoin dips. Additionally, by having a plan and seeing the bigger picture, you will be able to escape from being labeled as a trader with weak hands.
What Tools to Use
Like I mentioned earlier in this article, swing trading cryptocurrency is all about watching technical charts and indicating support and resistance zones. Furthermore, support and resistance zones can be described as:
“In cryptocurrency market technical analysis, support and resistance are certain predetermined levels of the price of a coin at which it is thought that the price will tend to stop and reverse. These levels are denoted by multiple touches of price without a breakthrough of the level.”
If you are already familiar with trading or analyzing cryptocurrency price levels, then you must know Tradingview. This tool is a must have to start analyzing the cryptocurrency markets on a technical level. You can start there with a free account and add(up to three) technical indicators in your charts.
What are the benefits of using Tradingview
TradingView’s diverse offerings make it palatable to most types of traders but I think there is a bias among the members towards medium-short term trading. First off, the free account plan is perfect for most investors and longer term swing traders who don’t require more than three indicators on their charts. Besides them, I think the general demographic of TradingView is technical based swing and intraday swing traders.
Below I have listed the overall advantages and disadvantages of using Tradingview when trading Bitcoin.
|✓ Very smooth charting for any kind of market||✗ No level 2 data (DOM is available if you have a CQG account)|
|✓ Amazing free plan||✗Very limited broker support|
|✓ Library of community produced indicators|
|✓ Proprietary, easy to learn, scripting language (Pine Script)|
|✓ Great backtesting tool|
|✓Huge amount of functionality in one charting package|
Stop loss levels
Last but not least we have the stop loss orders you have to set at certain levels. In addition, stop loss orders is a way to protect your crypto stack and reduce risk at all times. When swing trading cryptocurrency it’s very important to find an exchange where you can use such an order.
My favorite exchange to do this is Binance, which has the largest 24h volume and is very secure at storing your cryptocurrency wallets. Of course, it’s up to you and you have to make up your mind on that.
How to set up stop loss order? Very simple, if you bought a coin at a certain price then you can make up an advanced order. Additionally, with this order you sell this coin immediately when it goes below a certain price(for example -2%). In other words, you take a small loss to protect the profits that you made before getting in this position.
Swing trading & how to handle FOMO
Setting up an advanced order also works the other way around. if price breaks through the upside at certain resistance, often FOMO kicks into the markets. FOMO, an abbreviation, means ‘Fear Of Missing Out’ and happens always at high volumes which indicates large price spikes. To profit from this action is to set up an advanced buy order right above the technical resistance zone.
Cryptocurrency traders are having a hard time to be profitable in these highly volatile markets. To reduce risk and maximize rewards, swing trading cryptocurrency could be the answer. Also, to handle heavy price swings and be profitable, one has to be disciplined to hold onto positions in bigger time frames(1 till 3 days). To do so, I would advise you to educate yourself about technical indicators and patterns. Finally, with this knowledge and setting up a powerfull trading strategy is the way to go to be a profitable swing trader. Happy trading!
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