The definitive guide to crypto swing trading
Let me ask you a question ...
What kind of trader are you?
Are you the type who looks for stable, more conservative profits to protect yourself from big risks over time? Or are you the type that enjoys the high risk, high reward game?
You know ... the kind of person who is willing to knock out the park, retire early and travel the world eating bizarre food while hiking in the rainforest.
There's no shame in taking the easier, more conservative route. Buy a few coins, hold them and collect your earnings several years later. If that's more your speed, this guide is not for you.
Check out my guide:
Ultimate 2020 Cryptocurrency Beginners Trading Guide for Bitcoin & Altcoin Investing for all the insights you need to get your feet wet with basic "crypto investing strategies".
There is one strategy that holds the potential to generate the kind of massive returns that most people only dream about....
Sure, swing trading can be great if everything goes your way. However, it takes a lot of courage and discipline to hold on to those gains and not go "all in" with one or two bad trades.
It takes A LOT of "discipline" to continue on this rocky road when you've lost three trades in a row and start to question your new career path (or lack thereof).
I'm not saying this to scare you, I'm just letting you know the truth. You are embarking on a journey that will take you on an emotional rollercoaster.
Although swing trading can be a long and treacherous road paved with a lot of "emotional discomfort", the right trading system , the right discipline and the right emotional grit , the riches on the other side of this wall are lined with golden roads.
Read also: Best Crypto Trading Bots in 2020
I will go through a lot of material in this guide. I highly recommend you take copious notes (or bookmark this page), as a lot of this stuff will make more sense when you start getting your feet wet in the field.
I'm going to give you everything I've learned on my own swing trading journey so you don't make the same mistakes I did.
Many of these lessons I learned the hard way. With many of them, you will also learn the same way regardless of how much I emphasise them here.
Like most of us, we never really learn our lesson until mistakes are made. Get ready and welcome "your mistakes". You will soon become best friends with them.
So let's get right to it, shall we?
Lay siege to the crypto market and storm those golden palace walls to claim the wealth that is rightfully yours!
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Day Trading VS Swing Trading
Buy low, sell high. Simple enough, isn't it?
That's what I thought when I started swing trading, but it's everything in between that really counts.
There are usually two types of trading, which can usually be divided into day trading or swing trading. Day trading usually describes someone who sits in front of a computer all day and makes several trades during that period. Usually this type of trader collects small percentage profits (1-3%) that increase towards the end of the day.
I don't know about you, but I don't have time for all that.
It's great some days when it's raining outside and you have nothing better to do, but doing it for a living is a whole other reality that I don't want to live in.
Considering the volatility of crypto trading, I have personally found much more success swing trading than day trading. Swing trading also allows you to live a life that is not always behind the computer.
Typically, swing traders make a trade every 1-3 days, but can sometimes last up to a week or more.
The beauty of swing trading is that you can make a much bigger profit (20% -50%) in a relatively short period of time without having to sit and stare at charts all day. It is also much less stressful and time consuming.
News events and technical analysis
There are two types of methods traders use to formulate their strategies: News events and chart analysis.
News events are events where a trader believes a price will rise or fall according to regulatory requirements, cryptocurrency bans, exchange hacks etc. They also include broader news such as cryptocurrency airdrops, contests, new exchange listings, technology upgrades and more. These events can trigger a bullish or bearish price movement, but this is not always the case.
On the other hand, technical analysis is the most commonly used tool for trading. It is a swing trader's best friend and can be used at any time, regardless of news or events.
A typical trader will study the price movement of a currency and formulate a strategy based on chart patterns, indicators as well as current momentum. Once these indicators and patterns match (called convergence), in some cases a predictable price movement of over 75% can occur (as in a head and shoulders pattern).
The probability of a trade going your way increases exponentially when certain news events meet technical analysis. The BEST TRADES are made when these two methods converge.
Technical analysis and why it works
Predictable chart patterns are found in all markets (stocks, forex, options, etc.) but are extremely common in the cryptocurrency trading market. Some may say that it is even more common due to the fact that there are so many beginners.
Now most "non-traders" will just call this luck or gambling until their blue in the face. Gambling, however, depends primarily on chance. Experienced traders rely primarily on ten years worth of market evidence from group psychology.
Let me explain...
Technical analysis is nothing more than a visual representation of trader psychology on a large scale.
I wish there was something magical about it, but it's about as simple and straightforward as maths. It is essentially what happens when you combine human psychology with mathematics over a long period of time.
I'm sorry if I might have taken away some of the mystique behind it, but its predictive nature has worked for decades and will continue to work for decades to come.
It all comes down to herd mentality....
Regardless of how much you want to believe you are an individual.... you are not!
Individuals can make unexpected decisions once they are isolated. However, when placed in a group setting, predictability is imminent. A group of individuals will inherently make predictable decisions within a "community" (and even act as others do).
This is the nature of being human.
We are designed to be predictable creatures when inserted into these group settings. There is nothing wrong with that. That is what has allowed us to survive for so long.
Just realise that this predictability allows "smart traders" to profit from the primal nature of communities.
The only question I have for you is... will you be the predator or the prey?
Enough of that, let's continue with what you have learned here, starting with the basics.
The 9 pillars of swing trading
Now that you have a good idea of why technical analysis works, let's start with the how.
In this section, I will discuss the basic pillars of swing trading. This is the foundation on which you will build your career in crypto trading. Make sure you don't just gloss over this section as one of the most important.
1. Only invest in what you can afford to lose .
This is the GOLDEN RULE for trading. I realise you've probably heard this 100 times before, but the only reason you've heard it so many times is because it's remarkably true. Not just for the fact that you can be broke and depressed (that's a better reason than any other), but for the simple fact that it makes you emotionally unstable for trading.
Trading with anxiety is one of the worst emotions you can carry. This will lead you to make careless mistakes. Fear will cause you to lose your patience. Fear will inevitably ruin your trades .... so don't do it!
When you are just starting out, trade with only a fraction of your monthly income. That way, it's no big deal if you lose everything. If you end up taking the right steps and come out ahead, transfer this mindset to collect more crypto with your profits.
Remember, if you invest money you can't afford to lose, you are simply acting out of desperation . Just assume that what you invest in cryptocurrency trading will be lost forever. Only with this attitude will you trade with a clear head.
PSA: Never use money from your home, credit cards or from a bookie you just met in your local bar.
2. Don't be greedy.
This is probably one of the most difficult pillars to master. Once you stop constantly trying to hit home runs and settle for a first or second base score, you will find that you win most of your trades.
Greed was the main problem I had when I first started trading, and it will most likely be difficult for you to overcome it as well. When I stopped swinging for the fences and focused on taking profit while it was on the table, my trading success started to fly.
There's a strategy I usually use on all my trades that has really helped me with this greedy mentality called "scaling". Basically, this is where you take partial profits from your trade until you reach your goal. For more information on the scaling strategy, see the technical analysis section of this guide.
Remember, no one has ever lost money to take profit.
3. Not FOMO.
This is another principle that has often lost many beginners and intermediate traders a lot of money. Trading FOMO is a combination of being too greedy and investing blindly.
The reality is that if a coin pumps fast, it usually dumps just as fast. It is only a matter of time before a pump and dump claims you as its next victim. Don't be that guy.
Like jumping on a train at full speed doesn't sound like something most people would like to try to FOMO the same way. I'm sure most of us can agree that we can wait for the next stop.
4. Learn from your mistakes.
This may seem like common sense, but you will inevitably make the same trading mistakes several times before you learn from them.
Don't beat yourself up too much in this case. A lot will happen when you first start swing trading. Just learn from them and do your best to make sure they never happen again.
If you write down your mistakes on a notepad and post them in a place near you, you will definitely not be able to make them again.
At the same time, remember not to let the losses discourage you. The reality is that they will make you a much better trader... if you choose to learn from them.
5. Accept your losses and continue.
However, similar to the column above, it deserves its own topic. Crypto swing trading will not always go according to "your" plan. How you deal with these losses is important. Try to realise early in your trading career that an essential part of swing trading is taking your licks and moving forward.
You must be prepared to accept your losses when they occur. Accepting your losses is as much a part of trading as winning. Even the most elite traders in the world deal with losses. It is impossible to make accurate predictions 100% of the time.
Never chase your losses. In chasing losses, a trader suffers more losses by trying to make up for them and taking risky trades. This is another reason why majority of traders fail.
Accept your losses, take them as a learning experience, reflect on your mistakes and start a new trade (preferably the next day or after a break) with a new pair of eyes.
6. Volatility is your friend.
It doesn't matter whether the price of an asset moves up or down. What really matters is that it moves. To take advantage of these 30-60% fluctuations, you need to choose coins that have high volatility.
The beauty of crypto trading is its inherent volatility. What some consider a negative feature of cryptocurrency should rather be seen as a strength. Massive swings are a great advantage for swing traders who know what they are doing.
One of the first steps to swing trading is to look for high volatility coins for the day and analyse the charts for promising entry and exit positions.
Here are two amazing resources I use to see which crypto coins have the most volatility on a given day.
7. ShuffleUp Volatility Tracker.
TradingView Crypto Screener
This is the result of people trying to leave altcoins to make bitcoin profits. On the other hand, when bitcoin prices fall, altcoin prices will also follow suit and fall.
The sweet spot for trading altcoins is during Bitcoin's consolidation phase or when the price is steadily rising over time. As long as Bitcoin is still "the king of crypto", drastic moves will always lead to drastic Altcoin results.
8. Keep a trading journal.
This provides a way for any serious trader to evaluate themselves objectively. The main purpose of a journal is to monitor both the performance of your trading system and your ability to execute it on a consistent basis.
Trading journals are only as good as what is written in them. If you don't track your trades closely, it will be very difficult to assess your trading performance over time.
Be thorough and honest. Do not change or list entries as it makes you feel better. Reflect on your entries every month and I guarantee you will learn a lot about yourself and your trading psychology.
9. Practice makes perfect.
Before you deposit money into your trading account, practice on a chart or demo account first. TradingView offers paper trading where you can trade with fake money to use your technical analysis skills.
Once you have a good overview of how the markets work and a basic understanding of technical analysis, indicators and chart patterns, you can take the next step with real money.
Start with low trading amounts to get used to the psychological factors involved in trading with money. Take your accumulated profit and continue to invest in your trading capital.
If you end up losing all your money, you undo that as paid training. This stage is about improving your skills and knowledge before investing a lot of capital.
These are my trusted 9 cornerstones of swing trading. I strongly recommend that you follow these tactics to the best of your ability. If necessary, print them out and keep them close by.
Next we will get into the finer technical details of swing trading such as layering, stop loss, take profit and everything else in between.
The finer details of crypto swing trading
Crypto traders have many tools and strategies at their disposal. In this section, I will discuss the most notable ones. When you use these tools, you learn things like....
- Stay away from the risk of losing all your capital in one trade.
- Teach you where to place your stop losses.
- Get the best buy and sell order prices
- Recognise reversal trend signals
Technical analysis, chart patterns, candlestick formations or indicators in this section. I have created detailed guides for each of these aspects of trading on our trading page here .
Here is a quick reference to some of the guides on CryptoCoinJunky. I strongly recommend that you read up on any aspects of trading that you are not familiar with before you start trading with your own money.
Buy the dips and sell the peaks
There is nothing more gratifying than the feeling that you are buying at the lowest point of a dip when the price is rising and later paying off at the very top of a peak.
Sure, you may get lucky on one or two trades, but this is more of an anomaly than the norm. However, that doesn't mean you can't come close.
I have only found one method where you can come close the vast majority of the time. The strategy is called "scaling".
Scaling is the process of dividing the capital you want to trade into segments. Each segment is divided into 2-4 price levels.
Let's say you are trading a total of 400 USD in Bitcoin. Instead of placing a lump sum of $400 each at once, you divide it into segments to get the best possible buy-in price.
Example: Bitcoin is falling and nearing the bottom of a key support level, with the RSI and Stochastic indicators oversold. You place a buy order as follows....
- US$100 at price level US$8,110
- 100 USD at price level 7972 USD
- 100 US dollars at a price level of 7875 US dollars
- 100 USD at a price level of 7819 USD
This scaling strategy would leave you at an average of US$7944 after spending your entire purchase order over US$400. As you can see, this is much more efficient to get a better price than putting everything on a bid at US$8,110 as Bitcoin continues to fall.
Now it's entirely up to you how widely you want to spread these scaling intervals. You can choose to spread them out every 0.50%, 1% or even 2% and so on. This is simply a matter of personal preference and also depends heavily on the type of coin you are trading. Low market cap coins increase / decrease the price share more easily than higher market cap coins.
Now we were still not clear....
Your next step would be to set a stop loss to avoid wiping out a large majority of your trading capital. This also avoids you becoming a losing trade.
It is up to you to determine where to place your stop loss. However, I will cover stop loss placement strategies below.
Another alternative to the scaling strategy would be....
- 100 USD at a price level of 8094.50 USD
- 125 USD at price level 7972.43 USD
- 175 USD at price level 7875.04 USD
As you can see in this example, we increase the buy order amount the lower the price is. This way, you can accumulate more at each level of the dip so that you take more profit when the bulls are back in favour. Make sure you set a stop loss below a large support and / or a previously large wick dip after your last buy order.
Stop Losses - Your Crypto Swing Trading Safety Net
A stop loss is basically a price level at which you automatically end your trade. It's really not that hard to understand, but there are many strategies that revolve around the placement of your stop loss.
Now there are two types of strategies for stop loss placement. There really is no right or wrong in terms of these placements. It all depends on how conservative or risky you are as a trader.
Let's look at the conservative approach first.
The stop loss placement in this strategy consists of a tight stop loss, usually around 1-5% below your buy order. It is also important to place it at a sufficient distance below a major support.
Let us examine both the advantages and disadvantages of this placement strategy.
As you can see, there is no right or wrong stop loss placement strategy. The smarter strategy is to choose a stop loss according to the history of the coin you are trading. Some coins are much more volatile than others.
Some coins have a long history of dumping before they are pumped. Some coins stand pretty still before a rally. Notice these types of patterns and realise that there is no one-size-fits-all stop loss strategy.
I do not recommend placing a trade without a stop loss unless you are willing to wait a few days, weeks or even months to break even on the trade.
I have tried this strategy more times than I care to admit, and have been stuck holding pockets for a very long time (some of which I have never recovered). Please keep this in mind.
Next, let's cover an important part of your trade, setting profit targets ...
Take profit while it's still on the table
Many beginners put too much emphasis on their entry points and not enough on their exits. It is not your entries that make you profit, but your exits that determine your success.
Setting a proper "take profit target" is one of the most important aspects of trading. So do not take this section lightly.
As you may have guessed, profit targets are where you claim your wealth. There are many ways to determine where to set your profit targets using technical indicators, chart patterns or candlestick formations.
I will show you the two easiest ways to set your profit targets for maximum profit potential.
# 1 Using resistance
Setting a take profit target below previous resistance is a great strategy for beginners. Make sure you don't get too greedy and place your target 1-2% below a major resistance.
To make sure your target is reached, make sure the price has an odd number and not exactly a major price level as well as an even number.
Example: set it at USD 8,191 and not USD 8,200.
# 2 Scaling from your trade
Similar to the scaling strategy above, it is also good to take a profit all the way to your final profit target.
This ensures that you are always moving away from a profitable trade with some form of profit. Your final take profit target may not always be reached, so it is good to take a small profit while the bulls are in session.
Here's a good example:
Your buy order for BTC is at $7318, and your take-profit target is at $7,464, just below major resistance. Alternatively, you can set your targets so that 50% are at 7464 USD and 50% are at 7542 USD when some earlier wicks have been touched. This gives you the opportunity to take profits while watching for previously recorded tops.
This is another way to relieve the stress associated with trading. The feeling of taking profits along the way provides a better mindset for future trades.
# 3 No Stop Loss Strategy
Warning: Not suitable for beginners.
I could not end this stop loss section without at least mentioning the no stop loss strategy. Note that I do NOT recommend this strategy for beginners. However, there are times when a stop loss can be beneficial to you.
If you end up trading on an extremely volatile and unpredictable chart, using no-stop loss can benefit you in the long run as you can more easily recover losses on an upswing. Again, this should only be considered during a stable bull market. This makes it much easier to recover losses if the coin temporarily falls on you.
Also worth noting ...
Never trade without a stop loss during a major uptrend or near an all-time high for a particular coin.
Tip: If things are going south quickly and a dramatic decline has occurred near strong support, always exit the trade during the next upswing, close to your original buy order . This is not the time to be greedy. Take what you can get on the following rally. Recovering your loss is your top priority at this point.
Typically, you have only one (at most two) chances to recover from a dramatic decline after your original buy order. Take the first rebound you get out of the bath to make up your loss.
This could mean the difference between losing 30% or 5. Remember, it is always better to be safe than sorry.
Life Signals: Divergence and Confluence
Divergence is one of the strongest signals you can use to identify the reversal of a trend. This is something you should look for early on in your crypto trading journey.
Although the name sounds a little intimidating, the signal is far from it. Divergence is simply the comparison of the trend price movement with the trend within the RSI indicator. If price action is moving up and the RSI indicator is trending down, chances are you have an impending trend reversal.
The more time frames you can find, the stronger the signal. For example, if you find divergences in the 30, 60 and 240 minute time frames, you know that a reversal is on the way.
Confluence is another very strong signal you want to watch out for. It is the exact opposite of divergence. This signal occurs when multiple technical indicators line up to give you the same trading signals in one direction of a trend. The more confluence you have, the more likely that trend is to prevail.
Confluence can include a combination of indicators and chart patterns.
For example, when the price level reaches the top of the Bollinger Bands while a double top chart pattern is formed and at the same time becomes overbought within several time frames for the RSI and Stochastic indicators. This would be a sign of a confluence where price is most likely to fall. The confluence would mean a good time for a trader to either exit their long position or enter with a short position (profit on the way down).
You did it! What to do next
Great job on making it to this long and intense guide!
The rules and strategies I have covered above are by no means the final lessons you will learn for swing trading crypto, however they are a good starting point. When it comes to trading, things are easier said than done. Do yourself a favour and follow this guide to the best of your ability. Remember that nothing will ever truly replace personal experience.
You might be feeling a little overwhelmed right now. This is perfectly normal as I have thrown a lot at you. Let me give you a good starting point from here.
- Open TradingView and start analysing and plotting various charts.
- If you are not familiar with standard chart patterns, candlestick formations and indicators, visit the trading page here .
- If you are familiar with chart analysis, switch to paper trading on the TradingView platform. Keep track of your profits, losses and gains in your trading log.
- If you have completed many trades (20-50) with a record of at least 50% profit, start with a small amount of trading capital (100-500 USD). Remember that these are funds you never want to get back.
If you are truly passionate about living an independent lifestyle free from the hustle and bustle of 9 to 5, don't stop until you get there!
"The best preparation for tomorrow is to do your best today"
Good luck my friend and enjoy the journey!
Leave a comment below if you have any questions and I will get back to you shortly!