Trading cryptocurrency can be tricky, but it doesn’t have to be. There are tried and true trading methods that you can use to minimize risk and maximize returns in the crypto market. Now many of these methods fall under the umbrella of swing trading. Today I’m going to tell you about a few simple swing trading techniques that will help you turn wrecks into riches.
It’s about time we got started with swing trading. Swing trading is a type of trading technique that focuses on the long term price trend of an asset by contrast day trading is a type of trading technique that focuses on the short-term price trend of an asset. Swing trading is often said to be safer than day trading. But, this ultimately depends on the swing trading strategy being used. Now there are many different swing trading strategies. These are typically tailored to a specific asset class. They can vary substantially from trader to trader. The swing trading strategies for cryptocurrency I’ll be discussing today are not exhaustive and I encourage all of you to create a swing trading strategy of your own. If you have the time and energy.
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What is swing trading?
If you have neither of the two the swing strategies. I’ll be discussing today should do now. There are five things to keep in mind when swing trading cryptocurrencies: first follow the trend, second pay attention to patterns, third take note of moving averages, fourth use indicators for additional confirmation and fifth. If what you’re seeing doesn’t make any sense then wait, do not trade notes. I’ll be focusing on bitcoin for the purposes of this tutorial, But, I will explain how these factors change when applied to large and mid-cap altcoins.
As you can see zooming out reveals a clear long term uptrend for BTC. This trend is even clearer when you plot BTC’s price on a logarithmic scale. You can find it by clicking on the log button on coin market cap or the logarithmic button on CoinGecko. If the cryptocurrency you want to swing trade is clearly in a long term downtrend, you might want to consider another coin or token or just stick to day trading which I don’t recommend.
By the way, that’s because day trading offers about the same percentage returns as holding in the long term assuming. You’re not holding on to a coin. Of course, now you can learn more about how to spot a coin by watching my video about that in the top right. Anyways, once you’ve identified the long-term price trend the next step is to identify any price patterns on the monthly chart. What you’re doing here is assessing whether. Now is a good time to swing trade in the cryptocurrency you’re interested in. If you can see that this coin or token is currently in the middle or near the end of a bullish price pattern. It might be a good time to buy bullish price patterns including double bottoms inverted head and shoulders falling wedges and bull flags conversely. If you can see that this coin or token currently is in the middle or near the end of a bearish price pattern. You might want to wait and see bearish price patterns include double tops head and shoulders rising wedges and bear flags now using BTC’s price action as an example.
I reckon I see a bull flag forming on the monthly this suggests that now is a good time for a swing trade. I could wait to buy until we hit 61k for confirmation just to be safe a conservative price target is around 70k when measuring with the body of the reference candle. An optimistic price target is around 75k when measuring with the wick of the reference candle. Now one of these price targets should be hit in december january or february assuming the bull flag pattern plays out according to plan. Once you’ve identified the long-term price trend and the presence of a bullish price pattern on the monthly chart. The next step is to drill down into the daily chart. What you’re doing here is assessing where you should sell. If prices start to drop unexpectedly and check to see. If there are any short-term price patterns that could take you to that price point or vice versa. If you watch my video about my personal crypto trading strategy, you’ll know that I pay close attention to the 50-day 128-day and 200-day moving averages. Now in the context of swing trading these play an important role as support during a long-term uptrend and as resistance when prices fall below them BTC tends to bounce off the 50-day moving average. But, as you can see we’ve recently broken below it and are having a hard time getting back above it.
Although this isn’t a good sign. It’s not nearly as bad as a break below the 128 day moving average which brought about the bear slump in the spring. We also broke below the 200-day moving average back then as such if prices fall below these two price points. You might want to sell and if you want to be extra safe. You might want to sell when prices fall below whichever moving average is the highest. In this case that would be the 128 day moving average which is sitting at around 50k. Remember that these must be a definitive close below this point i.e at least one or two days of prices dropping below it. If you see prices approaching this point. The way we did recently try to identify any reversal patterns before you panic looking at BTC’s recent price history. We saw a descending triangle on the daily which broke to the downside in mid-November.
Then we sought two bear flags that brought BTC down to around 55k for a reversal to happen. There needs to be a bullish pattern like the ones I mentioned earlier or at least a reversal candlestick pattern. Now reversal candlestick patterns include three white soldiers, morningstar bullish hammer three-line strike and bullish abandoned baby. That’s actually what it’s called in the absence of any reversal patterns. The safest thing is to assume the worst and take some money off the table. Especially, if you’re in profit remember that waiting is also a wise decision and if you’re feeling brave you can buy the dip. I have a video in the top right that can help you do it. Once you’ve identified the long-term price trend the presence of a bullish price pattern on the monthly chart and moving averages on the daily chart along with any reversal or continuation patterns. The last step is to confirm everything you’re seeing using a series of technical indicators specifically. The moving average divergence convergence or MACD, the relative strength index or RSI and bollinger bands. Now while trading volume is another important indicator that many swing traders keep in mind it’s arguably less reliable when it comes to cryptocurrency. In theory trading volume is the easiest way to determine if a pattern or price trend will continue.
This is confirmed when there is lots of trading volume supporting a bearish bullish or reversal pattern in practice. However, the low balance of BTC on exchanges means that it takes a lot less capital to push prices up or down. This means it takes less trading volume to move prices around. As you can see on BTC’s weekly price chart trading volume has been on the decline since may while prices have spiked during that time an experienced swing trader would look at this and see a bearish divergence opposing trends between prices and trading volume. It suggests that BTC is about to crash. The thing is that the balance of BTC on exchanges has likewise declined substantially since may and this trend continues to this day. This means that a decline in trading volume is arguably of little concern. When it comes to predicting price so long as the BTC on exchanges continues to drop too. What’s more important is the MACD now as some of you will know the macd tells you whether there’s about to be a change in the trend.
This is what it means when those two lines cross starting with BTC on the monthly. We can see that those two lines are coming close but have not yet crossed this confirms that we have a few more green months ahead switching to the weekly. We see a similar story though. These lines are coming closer to signaling a reversal now interestingly BTC’s daily MACD shows that. We saw at the start a shorter term reversal at the beginning of November something that was foreshadowed by a divergence between the macd and price which started back in October. We appear to be approaching another short-term reversal this time to the upside taken together this suggests that BTC will drop a bit more before rallying in December. This is in line with macro factors such as the bitcoin options expiries which tend to drag down the price of BTC. At the end of each month next up is the RSI which gives you a sign of when it might be a good time to sell and a good time to buy as a general rule of thumb. An RSI above 70 means it’s a good time to sell and an rsi below 30 means it’s a good time to buy starting again with BTC on the monthly. The RSI is showing a slight divergence in relation to price which is a bad sign on the weekly. However, the RSI looks just fine and suggests it could soon be a good time to buy. We can also see a bit of a divergence between price and the rsi on the daily.
But, this seems to be correcting which is a good sign. Also suggests that it might be high time to buy taken together this further confirms that BTC will drop before continuing its rally though the signals. Here are more mixed than they were with the macd now be sure to keep these inconsistencies in mind before making any big trades.
At last but not least, we have the bollinger band indicator which gives you the range within which prices are likely to move. If prices pop above the bollinger band, it’s probably a good time to sell. If prices drop below the bollinger band, it’s probably a good time to buy. So, starting once more with BTC on the monthly. We can see that the upper bound range for BTC in december is around 71k which is almost the same as the conservative price target, we determined with that bull flag we identified earlier. If BTC’s price pops above the bollinger band the way it did back in april and may this could take BTC up to around 78k which is again in line with the optimistic price target. We identified earlier meanwhile the weekly bollinger bands suggest an upper bound price target of 70k. The daily bollinger bands suggest an upper-bound price target of 68k taken together. This provides the final confirmation we need to know that we can safely buy BTC.
This article is a transcription of a video made by Crypto Bureau
Original video: https://youtu.be/v7LyUzKWGfQ