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Swing Trading Crypto ➤ Riding the Waves for Profit

Comprehensive Btcman guide to swing trading crypto strategies, bots, taxes, platforms, and indicators for profiting from medium-term price moves.

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Written by

Alex Crypto
Published on

September 13, 2023

Over the past few years, the crypto market has seen significant growth and has become the subject of intense interest. For example, in August 2022, the price of Bitcoin surpassed $60,000 per coin. Ethereum has also experienced impressive growth and gained popularity due to its technological capabilities.

Crypto swing trading can be an intriguing tool for investors due to the potential for profit on short-term price fluctuations. With market activity and information readily available, this strategy can yield decent returns.

In this article, we will delve further into the fundamental principles of swing trading crypto guide and provide practical advice.

What is swing trading crypto?

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Swing trading crypto is a trading strategy where investors aim to profit from medium-term price fluctuations of cryptocurrency assets. The main idea is to identify moments when the asset's price is likely to change from a decline to an uptrend or vice versa.

Key characteristics include:

  • Swing trades can last from several days to several weeks, with traders aiming for profits in the medium term.
  • Traders use technical analysis to determine entry and exit points for their trades. They analyze price charts, indicators, and price patterns to identify moments when the market may change direction.
  • Traders actively use stop-loss orders and define the level of risk they are willing to accept.

Examples of swing trading crypto strategies:

  • Breakout Trading. Traders look for moments when the price of a cryptocurrency asset breaks out of a certain price channel or support/resistance line. They open positions in the direction of the breakout, hoping for further price movement in that direction.
  • Fibonacci Trading. Traders use Fibonacci levels to identify potential entry and exit points. This strategy is based on the theory that price movements tend to return to specific Fibonacci levels after fluctuations.
  • Candlestick Analysis. Traders analyze price candlesticks on the chart, particularly reversal candlesticks, to identify potential entry and exit points.

Key differences from other trading styles:

  • Focus on medium-term price movements, whereas day swing crypto trading is oriented towards short-term trades, and scalping has an even shorter time frame;
  • Active use of technical and fundamental analysis to make decisions, whereas scalpers rely more on technical analysis;
  • May have lower risk compared to scalping but reflects potentially lower profits;
  • Traders may experience less pressure and stress, as they have more time to make decisions.

Overall, swing trading crypto can be an attractive option for investors seeking more flexibility and opportunities to profit from market fluctuations than traditional long-term investing or shorter-term trading styles like day trading or scalping.

Can you make money swing trading crypto?

This approach allows traders to utilize price fluctuations in the cryptocurrency market to profit in the medium term. Here are a few examples:

Renowned trader and investor Eric Finman became famous for his successful investments in Bitcoin. His story began in 2011 when he bought Bitcoin for $12. Later, according to reports, he sold some of his Bitcoin when its value exceeded $1,000, earning a significant profit.

Marcus is another example of a successful cryptocurrency swing trader. He specializes in analyzing technical indicators and signals to make decisions about entering and exiting trades. His success lies in effectively using technical analysis to predict price movements and profit from them.

Earning profits comes with certain risks:

  • Price fluctuations can be very sharp and unpredictable, potentially leading to significant losses.
  • A successful swing trader should have a deep understanding of technical and fundamental analysis, as well as the cryptocurrency market as a whole. This requires a lot of time and effort.
  • Emotional trading can lead to poor decisions and losses.

Swing trading crypto taxes

Tax aspects vary from country to country and can be complex. Here are some general recommendations for residents of the United States:

  • Income earned from swing trading crypto taxes is considered taxable. In other words, if you make a profit from the sale of cryptocurrencies, that profit is subject to taxation in accordance with the tax code.
  • The difference between short-term and long-term holding has significant tax implications. Profits from long-term holding (over 1 year) may be subject to lower tax rates.
  • It is recommended to seek advice from a tax consultant or attorney for guidance.

Please note that tax laws and regulations can change, and it's crucial to stay updated on the latest developments and consult with a tax professional for specific advice tailored to your situation.

How to swing trade crypto

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Before the best time frame for swing trading crypto, you need to determine your initial capital. It's essential to keep in mind that trading involves risks, and you could lose part or all of your investments.

Choosing suitable cryptocurrency pairs is a key aspect:

  • Select cryptocurrency pairs with high liquidity, as this allows for easier execution of trades at current prices and reduces the impact of spreads on your profits.
  • Pay attention to the level of volatility in cryptocurrencies. For swing trading, more volatile assets may provide more opportunities for profit.
  • Consider news and fundamental factors that can impact cryptocurrency prices.

Creating your trading strategy is a crucial aspect of successful swing trading. Risk management is also vital:

  • determine how much you are willing to invest in a single trade and what position size aligns with your risk tolerance;
  • set stop-loss orders for each trade to limit losses;
  • establish a maximum risk level you are willing to take on a single trade.

These steps and tips can help you start cryptocurrency swing trading with a better understanding and the skills needed for success in this market. Remember that learning, analysis, and continual refinement of your strategy and approach to trading are essential.

The best crypto for swing trading

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Several cryptocurrencies are suitable for the best crypto for swing trading due to their liquidity and volatility. Bitcoin is an ideal asset for swing trading. It has high liquidity and often experiences significant price fluctuations.

Ethereum is also an attractive asset for swing trading. It provides opportunities to profit from price swings. When choosing a cryptocurrency for swing trading, it's important to consider not only their liquidity and volatility but also market characteristics and technical aspects of price analysis.

The best crypto swing trading indicators

Popular indicators for cryptocurrency swing trading:

  • Moving averages, such as Simple Moving Averages (SMA) and Exponential Moving Averages (EMA), help determine the current trend. SMA considers all prices equally, while EMA gives more weight to recent prices.
  • RSI (Relative Strength Index) measures the degree of overbought or oversold conditions in the market. This indicator has values ranging from 0 to 100 and is used to identify overbought or oversold assets.

These indicators help traders gather more information about price movements and identify entry and exit points in cryptocurrency swing trading.

The best crypto swing trading platform

Platform

Advantages

Disadvantages

Binance

Wide selection of cryptocurrency pairs and tools.

Low fees for active traders.

Various indicators and analytical tools.

Limited options for U.S. residents.

Lack of support for fiat deposits.

High competition among traders.

Coinbase Pro

User-friendly and easy for beginners.

High security and reliability.

Support for fiat currency deposits and withdrawals.

Integration with Coinbase for transfers.

Limited variety of available cryptocurrencies.

High fees for less experienced traders.

Tiered fee structure based on trading volume.

The best crypto swing trading bot

Here are two popular crypto swing trading bots and their capabilities:

  • 3Commas is a trading automation platform that provides tools for risk management and trading strategy development. Some of its features include automated order creation, trailing stop-loss, portfolio analysis, integration with most popular exchanges, technical analysis indicators, and signals. 3Commas allows traders to automate entry and exit from trades and effectively manage risks.
  • HaasOnline is an automated swing trading bot crypto known for its power and the ability to develop custom trading strategies using HaasScript, its proprietary programming language. Traders can create complex trading bots with various entry and exit conditions. HaasOnline also offers a variety of indicators and analytical tools to enhance strategies.

When choosing between 3Commas and HaasOnline, it's important to consider your needs, experience level, and technical knowledge.

The best exchange for swing trading crypto

Different exchanges have various characteristics, such as trading volume, fees, cryptocurrency availability, and functionality. The chosen exchange can determine your access to different assets and influence the speed and ease of executing trades. 

When selecting an exchange, consider the following criteria:

  • Ensure that the exchange has a high level of security, including two-factor authentication and cold storage for cryptocurrency storage;
  • Conduct research and check the exchange's reputation within the trader community;
  • Make sure the exchange supports the cryptocurrencies that interest you;
  • High liquidity allows you to execute large trades with minimal price impact;
  • Consider the cost of trading, deposit and withdrawal fees.

Compare popular cryptocurrency exchanges such as Binance, Coinbase, Kraken, and Bitstamp.

Parameter

Binance

Coinbase

Kraken

Bitstamp

Liquidity

High

Average

High

Good

Cryptocurrency Choice

Extensive

Limited

Diverse

Moderate

Suited for Traders

Active

Beginners and Experienced

Experienced

Various Trader Profiles

Security

Moderate

High

High

High

Reputation

Good

High

Trusted

Good

Integration with Financial Services

None

None

None

Available

Registration on the exchange and complet деing the account verification process are essential for ensuring security and access to all exchange features. Make sure you understand the verification process and follow all necessary steps.

Store your cryptocurrencies in secure wallets (cold wallets) instead of leaving them on the best crypto exchange for swing trading. This will protect your assets from potential attacks and losses. Understand the difference between cold and hot wallets and use them according to your security and accessibility needs.

Swing Trading Crypto Strategies

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In this section, we will discuss several effective strategies for swing trading crypto. Each of these crypto strategies has its own characteristics and may be suitable for different market conditions. Knowing these strategies will enable you to make informed decisions and increase your chances of success in swing trading cryptocurrencies. Let's take a closer look at them.

Moving Average Crossover Strategy

This best crypto swing trading strategy utilizes two moving averages, typically Simple Moving Averages (SMA) with 50 and 200-day values. When the shorter-term SMA50 crosses above the longer-term SMA200 from below, it can be perceived as a buy signal. Conversely, when SMA50 crosses SMA200 from above to below, it can be a sell signal. This strategy is effective in trending markets and helps traders identify the overall price direction.

RSI (Relative Strength Index) Strategy

The RSI indicator measures market strength and weakness and is used to determine overbought or oversold conditions of an asset. When RSI exceeds the 70 mark, it may indicate overbought market conditions and be a sell signal. On the other hand, when RSI drops below 30, it can be a buy signal. However, it's important to remember that this crypto swing trading strategy works best when confirmed by other indicators and market analysis.

Fibonacci Retracement Strategy

This crypto swing trading strategy employs Fibonacci levels to identify potential support and resistance levels on price charts. When these levels coincide with other indicators or areas of interest, it can be a favorable moment to enter or exit positions. For instance, if the price bounces off the 61.8% Fibonacci retracement level, it can serve as a buy signal.

Breakout Trading Strategy

This strategy is based on tracking assets that break through specific support or resistance levels. For example, if the price of a cryptocurrency breaks above the upper boundary of a six-month support channel, it can be a buy signal. It's essential to confirm such signals with other indicators and market analysis.

Trend Following Strategy

This swing trading crypto strategy involves opening positions in the direction of the overall market trend. For example, if the market is generally trending upward, a trader may look for buying opportunities. It's important to use indicators like the Average Directional Index (ADX) to confirm the trend before entering a position.


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