How To Build A Crypto Swing Trading Strategy

Published in

Coinrule

6 min readDec 10, 2021

Trading has become an exceptionally lucrative endeavour in the modern world. While many people still rely on forex trading to profit from the market, interest in trading strategies that utilize cryptocurrencies is also increasing. Within crypto markets, the daily recorded trading volume exceeds $6.6 trillion.

The crypto market has expanded significantly in just a short period of time. With the right strategy, you can give yourself the opportunity to make large profits by trading different types of cryptocurrencies.

Different trading strategies exist, making it harder for traders to determine what will work best for them. Swing trading is considered one of the most effective strategies, especially for beginners who are still learning how to succeed in this market. Let’s take a closer look at how swing trading works and what you need to know about this strategy.

What Is Swing Trading?

There are several strategies that people generally use as a way of profiting from both forex and cryptocurrency markets. Among these strategies, swing trading has become quite popular. The strategy is not only used by experts but is also considered a good option for people who are new to the market.

With swing trading, you’ll generally aim for either short-term or medium-term profits with the trading moves you initiate. The idea is to initiate a position on a specific trading pair and then keep this trade for a certain period of time. Some people who utilize a swing trading strategy will only keep the position for a few days, but others prefer to hold the position for several months before ending the trade. The strategy takes advantage of technical analysis tools, which allow traders to identify opportunities. Traders who are more experienced may use a combination of both fundamental and technical analysis tools to look for specific patterns. By identifying patterns, it is often possible to get a better idea of the opportunities, the probability of success with the position, and how long the position should be held.

Day Trading Vs Swing Trading

Two of the most commonly used strategies include day trading and swing trading. While these strategies were originally developed for forex trading, many people are now implementing these techniques when trading in the cryptocurrency sector. It is important to understand the differences that exist between the two strategies, as this will help you identify the appropriate option that will work for you.

The major difference between these two strategies comes into play when looking at the period of time for which you hold a position. With day trading, the idea is to initiate a trade and close it by the end of the day. This means you’ll need to perform consistent research and ensure you understand when to start the trade and when to close it because even short delays in either action can result in a loss.

With swing trading, the idea is not to book a profit on the trade within the same day. Instead, you’ll be keeping a trade open for a certain period of time. This could be a week, a month, or even several months. In many cases, traders are able to gain larger profits from swing trades. This is generally due to the fact that more time is given for changes to occur within the position.

Pros And Cons

When it comes to swing trading, it is important to consider all factors related to the strategy. This includes both the potential benefits as well as drawbacks you may face when you utilize the technique.

Let’s start by considering some of the most important benefits associated with swing trading:

There is no need to be as consistent with monitoring movements in the market compared when day trading. This gives you more freedom in the process.
Large movements in a specific trading pair often happen over a period of time. By using swing trading, you can take advantage of such opportunities, resulting in bigger profits.
With swing trading, you can utilize different analysis methods as a way to identify patterns, trends, and opportunities. This means the trading strategy is not too limiting in terms of what you can use to analyze the market.

While there are several benefits, we also need to take a closer look at potential drawbacks associated with swing trading:

With large movements in a market come big risks. If you are not careful with the trades you make, these large movements may not play out in your favour, which can result in significant losses.
You won’t be able to profit as frequently or consistently compared to a strategy like day trading. Sometimes, you’ll have to hold your position for several months before you can close the trade and profit from your idea.

Examples

There are several examples of how swing trading can be used in the crypto market. Commonly, swing trading in this market involves opening a position with USDT on one side of the trade. For example, a common trade option involves an ETH/USDT position. When initiating the trade, you’ll first consider existing trends — identify levels of resistance and support while also understanding the current trend. One effective method that many people use is to wait for a fakeout — and then enter the trade at this point.

Another way to trade swings is to use the Relative Strength Index (RSI). Consider a very simple strategy that buys when RSI dips below 30 and sells when the RSI is above 70. The chart above shows where such a strategy would have bought and where it would have sold. The benefit of using the RSI is that swings in the RSI are relatively more predictable beforehand whereas prices swings only become apparent after-the-fact.

The strategy explained above can also be converted into an algorithm. The best part about algorithms is that they take out the unreliable element of human emotion which often negatively impacts your trading. This strategy can actually be created with no coding experience on Coinrule and can be setup to run in the cloud 24/7 in the cloud on your behalf.

Conclusion

Swing trading has become a relatively popular strategy among people who have an interest in cryptocurrencies. This type of trading strategy is often considered to be beginner-friendly, making it the perfect option if you are still new to trading in general. It is, however, still important to understand all of your options while also looking at the pros and cons of each before deciding which strategy will be most effective for your needs.

What is Coinrule

Coinrule allows you to create trading rules that run automatically across your favourite exchanges.

With Coinrule you can easily develop your own trading rules and strategies and set them up to run automatically. It is the “if-this-then-that” for cryptocurrency trading that allows you to plan your crypto trading rather than having to sit for hours in front of charts. Best of all? No coding skills are required, meaning anyone can use Coinrule.

DISCLAIMER

I am not an analyst or investment advisor. Everything that I provide here site is purely for guidance, informational and educational purposes. All information contained in my post should be independently verified and confirmed. I can’t be found accountable for any loss or damage whatsoever caused in reliance upon such information. Please be aware of the risks involved with trading cryptocurrencies.