Swing Trading Cryptocurrency: Comprehensive Guide 2022
Many new participants enter the crypto market every day, and most do not understand how to trade crypto profitably. Many newbies will be swinging haymakers in the dark, with a complete lack of strategy.
There are different trading styles that people use with varying levels of success. Swing trading, when done right, tends to be the most profitable strategy.
If you want to be successful in this market, you should learn how to swing trade crypto. Swing trades with short to mid-term profitability goals can last anywhere from several days to 2-3 weeks or up to a month.
Swing trading is very different from but often confused with ‘day trading.’ Day trading requires a great deal of computer ‘screen time’ to look for trading opportunities where you can buy and sell in a ‘small profit’ within 24 hours.
Day trading is a popular trading style, but it’s not for everyone because it takes a higher level of skill and market knowledge, experience, and time to be consistently successful.
It’s not ideal for a newbie to approach the market as a ‘day trader.’ It is much easier and far more forgiving to learn how to ‘swing trade’ crypto first.
You can step up to day trading with confidence once you have become comfortable, gain experience, and succeed with swing trading.
Even though it can be done, crypto may not be as good as the stock market for day trading in comparison, which provides a more stable and liquid market in comparison.
The crypto market is known for its volatility, where several hundred percent moves in either direction can happen on any given day.
Of course, if you are on the right side of these kinds of moves, you can do exceptionally well and multiply your holdings.
But if your approach and strategy are not sound, you could quickly get underwater with a losing trade.
Day trading gives you far less time to position and react. This challenging aspect can often cause less experienced traders to fall prey to making questionable trading decisions based on emotion.
If you learn how to swing trade crypto with a sound game plan, you can avoid the stress and emotion and not get thrown off by wild swings and whipsaws in market price.
How to swing trade crypto
Swing trading crypto will be the key to your success because it provides you with advantages that make it easier for you to win consistently.
We recommend using a charting platform like TradingView if you want to become a successful crypto trader.
Five Powerful Advantages of Swing Trading:
- You are not under pressure to sit in front of the computer all day, chasing satoshis [small profits.] Not only is this better for your mindset, but it’s better for your eye health.
- The ‘swing trading’ approach in the crypto market can easily provide you with at least several ‘high-profit potential’ trades per month.
- Using this consistently winning approach helps prevent you from developing a ‘gambling mindset.’
- Instead of settling for smaller profits, you can reap more immense rewards with swing trading.
- When done right, this trading style provides you with the ideal leverage, timing, and positioning to experience anywhere from 25% to several hundred percent gains with short to mid-term length trades.
- Because you are not spending all your time ‘day trading’ stuck in front of the computer, you can have more time to enjoy the rest of your life.
- You can even set up mobile alerts on a crypto price tracking app, so you can stay on top of the market’s movements when you are ‘on the go.’
- The most significant advantage of learning how to swing trade crypto is that it significantly reduces the risk of the crypto market’s volatility.
- Instead, it helps you to capitalize on it successfully!
There are a couple of different approaches to swing trading. New traders often base their trades on ‘news events.’ This approach is also known as ‘fundamental analysis.’ Experienced and successful traders take it a step further by using technical analysis, which bases your trading strategy on price patterns and setups on the candlestick charts [which helps to take the guesswork out of trading.]
Leveraging crypto news events for best swing trades
Leveraging ‘news events’ to find trades and lock in profits is a popular strategy. Having success with ‘trading the news’ in crypto is a bit less technical of an approach and has more to do with luck and timing. Beginners may use this strategy to gain some lucky wins.
But it’s going to require you to be consistently researching and staying on top of the market information to be able to discover these opportunities as they arise.
If you don’t explore and analyze the market daily, you will witness many opportunities slip through your fingers.
But suppose you want to learn how to not rely on luck. In that case, you can increase your profitability and overall win percentage if you also know how to do ‘technical analysis,’ which should be your primary approach to winning in this market.
Let’s dig a bit deeper into what goes into trading the crypto market according to the news.
The fundamentals of a cryptocurrency project are based on the timeline of news events about it.
It can be somewhat risky to base your strategy completely around trading the spikes caused by a news event.
Because you still don’t have a real sound basis for determining your trade entry and selling target, it’s essential to consider more factors through analysis.
In my experience in crypto, there is a mantra we call ‘sell the news.’ And this mantra seems to hold valid 99% of the time. And what do I mean by ‘sell the news?’
You can take it quite literally and look for the best opportunity to sell in profit on the news event’s date in question.
Just make sure that you have entered the trade far enough in advance to enjoy the positive movement caused by the build-up to the news event, so you can be in a position to sell.
Profitable traders do not buy into pumps caused by news events; they are already positioned to sell in profit when this time comes to pass.
On the date of an expected news event [ex. could be a development milestone or launch to exchange.], there are a couple of possibilities as to what will happen with price.
Most of the time, when an expected date of a news event comes to pass, the price may pump a little bit, but it will always end up meeting resistance and selling off.
In more rare instances, when unexpected but highly positive news hits the market, it can cause an incredible pump in price; however, that will usually always meet with resistance at some point.
Something you can look out for when these situations happen is the trading volume to taper off.
Once the hourly trading volume of trading starts dropping off, that’s a sure sign of an impending reversal of fortune or sell-off.
Some news events are highly anticipated from weeks to months or even longer, like the ‘bitcoin mining halving’ that occurs every few years.
These events can sometimes cause the coin’s price to grow or pump up to or near that date before meeting resistance and selling off.
It’s easy to recognize when a market is developing in this way. You can always be sure that no matter how good the news is, the price will only ever boost so high because of it and will always eventually meet resistance.
So therefore, ‘sell the news’ is indeed the mantra!
The cryptocurrency market is quite different from other markets like FOREX when it comes to the news.
FOREX has schedule news events pretty much daily that you have to plan your trading and risk management strategy around.
The crypto market is the wild west, less structured, and has various industry-based information sources that can you can tap into for market research.
Buy sell and trade
There are three significant types of news events that can cause volatility in the crypto market.
- Government announcements concerning regulation and legalization of cryptocurrencies.
- Hackings and closures of cryptocurrency exchanges.
- News from within the cryptocurrency market, including development milestones/roadmaps & strategic partnership announcements, Initial Coin Offerings [ICO] / pre-sales, airdrops, and mining halvings, to name a few.
Government regulation announcements:
Since I’ve been observing the crypto market since 2015, I’ve followed the announcements of countries legalizing the use of bitcoin and cryptocurrencies.
And I’ve watched the price of bitcoin grow over time with countless such events happening in the world over the years. And I’ve also seen ‘world powers’ like China try to ‘ban’ it and cause the price to dump.
In 2020 bitcoin was ruled as an asset protected by the law in the courts of China. These announcements have had significant effects on the market.
Hackings & closures of cryptocurrency exchanges:
Hackings and closures of exchanges can be red flags and catalyst to negative market sentiment and movements.
And these events can also cause you to lose your crypto if you are using centralized exchanges for storage/custody of your holdings!
So I urge you never to store your cryptocurrency on any centralized crypto exchange.
Always take the time to withdraw to a secured cryptocurrency wallet for safekeeping!
If you look to the past to the hack of Mt. Gox in 2014, Bitcoin was experiencing its first major bull market, and it was cut short when the primary exchange of the market [at the time] Mt. Gox, was hacked for millions of dollars worth of bitcoin.
Bitcoin dumped big time and experienced a long and drawn out bear market that lasted for several years after that point, where many pundits and people who were wrong claimed bitcoin was dead.
Crypto market news:
News from within the cryptocurrency market itself can lead to face-melting pumps and bullish opportunities. Examples of this could be when projects reach certain significant milestones on their development roadmap.
Or when a crypto project announces a major corporate partnership, new use case, or perhaps even a technological breakthrough.
Sometimes even news of launching to certain crypto exchanges can be very bullish news for an up and coming coin project.
You also have airdrops, which can inspire retail buying in the market inspired by the opportunity afforded by the new coin’s airdrop.
A major news event that happens every few years for bitcoin that always seems to catalyze a significant bull market for crypto is the ‘mining halving’ event for bitcoin.
Whenever a mining halving comes to pass, the amount of bitcoin generated into circulation through ‘mining rewards’ paid to the block producers/miners is cut in half.
That is a very bullish supply and demand dynamic for bitcoin in the mid to long term.
To stay on top of the crypto market news, you can regularly visit the well-known crypto industry news sites and follow them on Twitter.
You can also follow most of your favorite coin projects on Twitter to stay in touch with their news feed.
Crypto technical analysis
If you want to take your trading game to a higher profitability level, you will need to learn how to apply technical analysis to your approach.
Fundamental analysis helps you to find substantial trading opportunities.
Technical analysis is what you will use to hone in on the ideal points to enter the market [buy] and exit the market [sell] in max-profit.
Technical analysis has many approaches and strategies. And not all are equal nor ‘one size fits all.’
It would greatly help your journey to crypto wealth if you learned all you can until you discover the system/trading strategy that will work for you with confidence every time.
Technical analysis is a discipline that uses candlestick patterns, indicators, trading volume, and more to help you determine how to set your bids and sells to achieve your profitability goals.
Technical analysis will help provide you with a roadmap for swing trading in the crypto market.
Technical analysis has a few significant concepts at play that you need to understand.
The fundamentals of cryptocurrencies are accounted for in their respective price trends.
When the fundamentals grow strong enough to cause a significant demand push in the market, it causes a reaction.
When big players make their moves early on to enter into a crypto market based on positive news, it causes the ‘price sentiment’ for the coin in the market to grow and start a new bullish trend.
Prices move in trends. When big players jump in the market and cause it to start moving, this inspires other smart money to invest, driving further price growth, which forms the bull trend.
Once the price meets resistance and the new money’s velocity entering into the market slows down, and the big players who entered early will end up dumping to max out their profit.
This sequence of events causes an oversupply and a fall in prices, which will set the market into a downtrend or bear market for some time.
History repeats itself. The crypto market has bullish and bearish cycles, just like other markets of history.
These cycles are like a pendulum that swings from one end to the other repeatedly. And as you grow your understanding of this concept, it becomes much easier for you to see the massive financial opportunity.
And these patterns perpetuate themselves due to the psychology of the market participants, which seem to uncannily repeat themselves through the fractal-like repeating patterns you will find on the charts.
This kind of knowledge is indeed power, and not many people understand the power of this.
How to swing trade crypto with success. The four golden rules:
- Learn to approach the market with the proper mindset/psychology.
- It helps to learn about the market psychology behind the candlestick patterns, directly correlating with the market’s other actors/traders.
- Exercise Proper Risk Management with your trades.
- Settle on a system of parameters for setting up your stop loss. [ex. 5-10% loss]
- Develop a trading strategy AND STICK TO IT!
- Once you have a winning trading strategy, make sure you follow it.
- Traders so often go wrong and make mistakes when basing their trading decisions on ’emotion’ instead of sticking to their gameplan.
- Keep a journal of your open and closed trades, with detailed notes of your thinking processes.
- This practice will be a valuable learning experience for you.
How to swing trade crypto with strategy:
You will want to pay attention to several things when analyzing the charts looking for an opportunity to enter or close a profitable swing trade.
You are looking to buy and sell ‘signals’ in the market, which are signs that a market is either overbought [time to sell] or oversold [time to buy.] Successful traders usually look for at least three positive signals before taking a trade.
Here is a sample list of things you can look for when analyzing the charts.
- What is the condition of the crypto market at large?
- Bear or bull market?
- The 4-hour, daily, 3-day, and weekly charts are the best time frames to observe for swing trading.
- What is the condition of the coin market you are observing?
- Oversold or Overbought?
- When oversold, it’s a great time to be considering making a swing trade entry.
- When overbought, it’s a great time to consider taking profit.
- Identify the critical levels of support and resistance.
- Identify candlestick patterns for continuations or reversals of the overall trend.
- Once you have determined the direction of the trend you, can use Fibonacci retracements to find ‘price targets.’
- You can also use various technical indicators and studies to help you determine whether markets are overbought or oversold.
- Example: The Relative Strength Index / RSI momentum indicator. A favorite amongst experienced traders.
- Pay attention to the ‘trading volume’ of the market. When a market is trending up or down, trading volume always increases to the peak of the trend and then starts to taper off. When trading volume starts decreasing and tapering off, that’s a sign of an impending price reversal.
- You should always consider the current state of the bitcoin market when doing technical analysis for altcoin trading.
- The bitcoin market usually has a strong correlation with the altcoin market. Movements in bitcoin price will affect altcoin markets.
- The bitcoin market’s dominance of the altcoin market through this correlation has been known to weaken at specific points of crypto market history, which have allowed for a phenomenon called ‘altcoin season.’
- Altcoin season = A bull market for altcoins [non-bitcoin cryptocurrencies.]
Once you have analyzed the market and determined what direction it’s next significant move will be in, you will know whether you will be buying, selling the crypto’s spot market. [or shorting the market if margin trading.]
Next, you will need to consider the parameters of your swing trade entry, including the following:
- Determine the position size of your swing trade entry.
- The amount you are willing to risk on the trade.
- Your price targets for opening and closing the trade in profit.
- Fibonacci Retracements are super useful for helping you find your buying and selling targets.
- Exercise risk management.
- Determine how much you are willing to let the trade go underwater and set your ‘stop-loss’ accordingly.
- [5-10% would be common targets for setting your stop loss.]
- Decide whether you are trading the spot market or margin.
- Trading the spot market is easier for beginners to expert level traders.
- Margin trading is for expert traders, learn and master ‘spot trading’ first and then graduate to margin trading.
- Decide whether to jump in the market or exercise patience and strategy.
- Buy or sell the market instantly.
- OR set pending orders in advance to anticipate favorable price movements that would set you up with a great position.
How to swing trade crypto with proper risk management:
Good risk management will be the key to your long term success with the crypto markets. There are several ways that you can limit and manage your risk when swing trading. Including the following:
- Use appropriate position sizing.
- Don’t go all-in on one trade.
- Split your overall available trading balance into smaller segments.
- Example: If you have a $2000 USD trading budget, you could size your trade entries around $100-200. If you have a trading budget of $20,000, you could size your trade entries around $1000-2000.
- Use Dollar Cost Averaging. Since you are not going ‘all in’ on one trade entry, you will have additional capital to use if the price drops a level further than your first entry.
- And the same goes for when you are ‘taking profit.’ Find your selling targets, and split up your total trading position so that you can take profit at multiple price target ‘levels’ as the price grows to find it’s peak.
- Set yourself up for success with a favorable risk to reward ratio.
- Do not rush into trades based on emotion.
- Use technical analysis to determine when a market is oversold or overbought and trade accordingly.
- Buying low and selling high according to the technicals naturally sets you up with an advantageous risk to reward ratio.
- When you chase pumps after the fact, rather than already being in position for them, is when you will end up stuck with an unfavorable risk to reward ratio.
- An unfavorable risk to reward ratio = an out of position trade entry, which puts you at a higher risk of loss and a smaller potential for gain.
How to swing trade crypto example:
In the following image, I present you with a recent swing trade opportunity that happened for Syscoin that provided an opportunity for 52-57% profit.
This analysis uses a 4-hour candlestick chart, the Relative Strength Index [RSI] momentum indicator, Bollinger bands, and simple moving averages.
You can see it at the bottom of this chart, with the horizontal plotting yellow line.
The RSI is a dependable oscillator style indicator, which can be one of your three signals in determining when a coin market is either oversold or overbought.
The ‘buy’ arrows on the candlestick chart and RSI show where the ideal point to enter the swing trade would have been around 239 satoshis.
At this point in the chart, you can see that the RSI’s yellow line is piercing down through a horizontal line, which is a level that indicates that the market could be considered ‘oversold.’
Next, take notice of the two ‘sell’ arrows that indicate the ideal point to close your swing trade in profit.
Once again, the RSI indicates that it’s time to make moves with your trade, as it’s finally piercing through the upper line of the RSI below, which indicates that the market is overbought it’s a good time to sell before the price reverses downwards.
Another thing you’ll want to observe about this chart is the use of Bollinger bands.
If you look carefully at the chart areas indicated for buying or selling, you will see that the price breaks through the Bollinger bands.
That can be another indication that price is overextending in one direction, creating a trading opportunity.
Bollinger bands can be a useful indicator when paired with the RSI, but it can get you into trouble by itself.
As sometimes, when the price goes through the Bollinger band, it will pick up momentum in that direction and move the price much further than you may have anticipated.
The green line going across the image is a simple 200-day moving average.
And the red line is a simple 50-day moving average. Notice when the price is low, it meets resistance several times before it finally breaks through it and flips from resistance to support.
As the price pushes upwards, the 200-day moving average looms above as a previous resistance level.
Just like the 50-day moving average, you can expect this to at least act as a level of resistance initially.
And even if it breaks through, it will probably revisit the green line or drop back below it.
But once the price can finally manage to close multiple consecutive candles above it in a bullish trend, the 200-day moving average can become a strong support level.
And this can last until the end of the bull trend, where the price will eventually fall back below the 200-day moving average, at which point it becomes a critical level of resistance once again.
Now that you have a basic understanding of how price in the market reacts to moving averages, you can see an additional signal for selling provided by the 200-day moving average.
When the price breaks out above the 200-day moving average, it ends up dropping right back down to the green line.
And the next candle continues to open up on the 200-day moving average [green line] before dropping back below it. At this point, the RSI is indicating the market is oversold, and the 200-day average is acting as a price magnet.
Having pulled the price violently back down to it, causing a major upper candlewick shows significant resistance in that price area.
If you did not sell when you first had the signal from the RSI when it was peaking, you’d still have an obvious shot to get out of the trade with the lion’s share of the profit by the time the next candle opens flat.
Since this example is trading a 4-hour chart, it’s going to be best to take the trade according to the indicator and Bollinger band signals when they first happen.
Since the 4-hour is a shorter time frame, you will have less time to react when the price starts reversing.
If you would like a bit more time for decision making, you can use this same approach with a daily candlestick chart, and the 3-day and weekly charts can also provide you with valuable insights in terms of the longer-term trend.
A rule of thumb with swing trading crypto is that the longer timeframes you use to base your trades, the bigger your profitability will be.
I hope you enjoyed this a practical instance of how you can set up and complete a swing trade using a few indicators that work very powerfully when paired together.
I typically use a few more indicators in my analysis, but I did not want to make this too overly complicated for you.
We suggest creating a free account with TradingView and get familiar with the indicators available so you can sharpen your trading skills. See our TradingView review to learn more about this powerful charting platform.
Learning how to trade the crypto market is best done a step at a time, so you can build a foundation of knowledge and skills that will genuinely allow you to reach your financial goals.
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