How to Master Swing Trading in the Cryptocurrency Markets

Cryptocurrencies have dominated the news in recent years. The rise of altcoins such as Bitcoin and Ethereum is impossible to ignore, so it is hardly surprising that many forex traders are paying close attention to trading opportunities in the cryptocurrency market. In this article, we are going to examine the merits of swing trading in cryptocurrency and how to get started.

One bitcoin was worth around seven cents in 2010. Today, that bitcoin would be worth approximately $6,200. If you had sold your bitcoin in December 2017, you could have made a substantial profit, as bitcoin hit the heady heights of nearly $20,000. The market has since corrected sharply, but those who bought into bitcoin in the early days are sitting on a nice little nest egg.

Trade Vs. Invest

There are merits to investing in bitcoin, but if you want fast gains, trading is the best way to achieve this. When you trade cryptocurrencies, you don’t actually own any altcoins. Instead, you are betting on the rise and fall of its value, just as you are when you trade in stocks, shares, CFDs, etc.

There are different ways to trade in cryptocurrency. You can trade cryptocurrency stocks if you don’t want to trade cryptocurrency directly. Either way, you need to open an account with a reputable broker.

The Fundamentals of Swing Trading

Swing traders hang on to a trading instrument for as long as it takes to realize gains. So, whereas day traders open and close a trading position all in one day, swing traders may keep their open position for several days. Their aim is to capture the greatest degree of upward price momentum.

The Advantages of Swing Trading

There are many advantages of swing trading and if done well, it can generate a significant profit for your trading account. Some traders speculate on the newest altcoins, on the basis that these often spike in value as they enter the mainstream consciousness. Rather than dipping out of the markets on the same day as you open a trading position, you can hang around for a bit longer and capitalize on market movements.

You can also take the opportunity to identify new positions and markets with potential trading opportunities. For example, you might spot an upward trend in bitcoin but because it’s early days, now is not the right time to open a position. However, by tracking the cryptocurrency, there could be an opportunity to make a profit in the near future.

Swing traders are usually very analytical. They monitor the data and pay close attention to the technical aspects of trading. This helps to protect them against serious losses, as they understand the markets better than most.

The Disadvantages of Swing Trading

Cryptocurrencies are very volatile with huge price swings in either direction, sometimes in the same day. Whilst cryptocurrencies are slowly gaining mainstream acceptance, prices can see-saw up and down with frightening regularity.

As a swing trader, you are more exposed than other traders to the volatility of the markets. Trading is always a risky business, but the volatility of cryptocurrencies makes it one of the riskiest markets to trade. You will need all your wits about you if you want to become a profitable swing trader.

Swing trading requires a heavy time commitment. You can’t just open a position and forget about it. To make a profit, you need to continually monitor your trades, so you can exit when the market moves in the wrong direction or sell to make a profit. This will inevitably take up a lot of your time, so swing trading is not conducive to a full-time job elsewhere; unless your full-time job is trading forex.

Not everyone has the mindset to swing trade in cryptocurrencies. To be successful, you need an analytical brain and a strong stomach for risk. Swing trading is high-risk and it is very easy to end up making a huge loss. Forex trading is leveraged, so you could end up losing a lot more than your original trading position. Bear that in mind.

Swing Trading Strategies

If you are new to swing trading, it is helpful to understand the principles behind the Exponential Moving Average (EMA). The EMA gives greater weight to recent price data. How this works is too complicated to get into here, but use it correctly and it can help you devise a successful swing trading strategy. Learn more about EMA here.

Pay close attention to the news. Major news sites like CNBC and Yahoo Finance have daily reports and news updates. Economic events and regulation affect cryptocurrency prices. Use this information to help you plan your trading positions.

Swing trading is ideal for new cryptocurrency traders, as they are not limited to opening and closing positions in one day. You can hold your position for a few days, which is often more profitable in the volatile cryptocurrency markets.

Always have limits in place when trading cryptocurrencies and remember, all trading activities carry an element of risk.


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