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Viewing the cryptocurrency market with a developmental perspective is an infinite state.
How should this sentence be understood?
In simple terms, it means whenever you have time, open your computer and see if you can make a trade to earn some money.
They want to hold a trade position for a long time but do not want to constantly check the charts; they hope to set larger profit targets while also wanting to limit losses to a smaller range.
So, is there such a trade?
The answer is willing to walk, which is swing trading +
Swing trading is a very popular trading type, as it brings relatively the least pressure to traders, but the returns are very considerable, especially for part-time traders; it is the perfect trading type.
But before introducing swing trading, one point needs to be emphasized:
Regardless of trading style, traders are fighting alone in the market, responsible for their account funds, and can't blame others even if they incur losses. It can't be said which is better; it only depends on which way you prefer and which way suits you better.
Take this swing trading expert I'm about to share with you today as an example. He has been in the industry for over ten years, tried various trading types and strategies but still frequently encountered losses. It wasn't until he switched to swing trading that he found: for him, swing trading is the best trading type, and daily charts provide him with the most accurate trading signals.
Therefore, to achieve stable profits in cryptocurrency trading, the first thing to do is find a trading style that suits you, and then refine your trading strategy, rather than blindly imitating others.
01 Advantages and disadvantages of short-term and swing trading
Since you need to find a trading style that suits you, you should first understand the advantages and disadvantages of each style. Let's first look at the pros and cons of short-term trading and swing trading:
Advantages and disadvantages of short-term trading
Advantages:
The market has many short-term fluctuations during the day. Trading opportunities based on 1-minute, 5-minute, and 15-minute periods are plentiful. The day trading model can effectively lock in short-term trading targets, making trading have clear pursuits and assessment indicators.
Day trading can lock in risks. Enforce day stop-losses based on capital and points, allocate capital operation ratios, quantify positions, making risk control more manageable.
Disadvantages:
Frequent trading has a higher risk probability.
Staring at the screen for long periods consumes energy, creates considerable pressure, and is detrimental to health. The advantages and disadvantages of swing trading.
Advantages:
Will choose trades with higher probability of profit;
Less pressure than day trading, no need to focus on charts all day;
Trading costs are lower than day trading.
Disadvantages:
Long holding time brings overnight risk;
Requires more patience, requires stronger principles,
The potential profits from day trading are more, while swing trading has more freedom and less pressure. In terms of making a profit, any trading method can allow traders to profit, but the key is still personal character, skills, and knowledge. Below, I will share this swing trading expert's understanding of swing trading and detail the six steps he follows for swing trading.
02 What is swing trading?
Short-term trading has been introduced in last week's article, so I won't repeat it today. Friends who haven't seen it can check the previous content you might have missed at the end of the article. Today, we mainly want to understand swing trading.
Swing trading (Swing Trading, also known as swing trading) is a trading strategy that attempts to capture a large wave of rising or falling trends, with holding times ranging from a few days to several weeks.
Swing traders, while using technical analysis to find trading opportunities, will also rely on fundamental analysis to analyze price trends and patterns.
A swing consists of two parts—swings and fluctuation points. As shown in the image below:
03 How to conduct swing trading?
Next, I will introduce the six steps of swing trading.
1. Focus on daily charts
Observe the daily charts more, as the daily charts provide the most comprehensive price movements and more reliable price signals.
But be aware: not all daily charts are worth paying attention to,
I mainly use the New York closing price daily chart. Because every 24-hour trading session closes at 5 PM Eastern Standard Time, this is also called the 'market close time' in the forex market.
Therefore, I recommend swing traders use daily charts; if you have already made a profit using daily charts, then you can try starting with a 4-hour chart.
In general, a higher time frame signifies more reliable price action signals.
2 Draw key support and resistance horizontal lines
Draw key support and resistance horizontal lines, which is the most important part of the entire process. For swing traders, if key support and resistance levels are not found, profits cannot be made.
Now, I will introduce two important horizontal lines: 1. Support and resistance lines
Support and resistance are points on the chart that withstand continuous upward or downward pressure. Support points are usually the lowest points in all chart patterns, while resistance is the highest point on the chart (peak point).
In addition, support and resistance levels are usually not an 'exact' level; it is best to consider them as a zone.
2. Trend line +
Although trend lines are the most common method in technical analysis, not all traders use trend lines. The reason may be that most traders cannot draw the correct trend lines.
In contrast, an upward trend line connects the lows of the swings, and a downward trend line connects the highs of the swings.
3. Judge fluctuations
If you have learned and can mark support and resistance zones on the daily chart, the next step is to use fluctuation highs and lows to determine fluctuations.
There are mainly three types of fluctuations: upward trend, downward trend, and range trend,
1. 【Upward Trend】
Higher highs and higher lows, the image below shows a typical upward trend:
In the above chart, each fluctuation peak is higher than the previous one; in this bullish trend, a buy order can be placed.
2. 【Downward Trend】
Lower highs and lower lows, the image below shows a typical downward trend:
In the above chart, each fluctuation peak is lower than the previous one; at this point, a sell order can be placed.
3. Range Trend
Horizontal movement, also called consolidation period, as shown in the image below:
Range trends are the most common type of trend. Although there is no bullish or bearish trend shown in the above image, fluctuation traders can still profit within this range, perhaps even more easily than in the other two fluctuating trends.
What should be done?
Utilizing support and resistance levels. As shown in the image below, pay attention to the two pin bars in the chart +
4. Find price action signals
Through these three steps, you have identified the current fluctuations on the daily chart.
1. If the market is in an upward trend, then you should start paying attention to buy signals at key support levels, as shown in the image below, where a bullish pin bar appears at the key support level.
The bullish pin bar in the above chart is a buy signal, indicating that we can profit in the ongoing upward trend.
2. If the market is in a downward trend, then you need to pay attention to sell signals at resistance levels, as shown in the image below:
We can take the bearish pin bar in the chart as a sell signal.
In fact, for swing traders, capturing the entire swing is difficult. What we can do is focus on swing changes as much as possible, and patiently wait until confirming the price trend before entering trades.
5. Determine exit points
Determining the exit point has an important prerequisite: set the take profit and stop-loss before entering the trade. This is because once you enter, your emotions will be influenced by market changes.
So, how do you determine the exit point?
It's simple, still based on support and resistance levels, as shown in the image below:
The above chart is a GBPUSD daily chart: it is clearly an upward trend, and the price has exceeded our set profit target. When this happens, there is no need to regret; we have captured most of the upward trend. Remember, you shouldn't be too greedy when trading. Let's take a look at the AUDNZD daily chart: we can also determine the take profit based on support and resistance levels, that is, the exit point. As shown in the image below:
In summary, support and resistance zones and trend lines are the foundation of all trading setups. Once these are determined, the entry and exit points become clear.
6. Calculate and manage risk
Currently, risk is usually calculated using the R ratio, for example, a 100-point stop-loss and a 300-point take profit setting is 3R. If your capital is $100 and you profit $500, then the risk-reward ratio is 5R,
Risk management is essentially about stop-loss and take-profit:
Stop-loss: The best stop-loss point is right above or below the pin bar's tail.
If a bullish or bearish engulfing pattern appears, it is best to set the stop-loss 10 to 20 points above or below the candlestick.
Take profit: Taking profit is still related to key support and resistance levels. For swing traders, the key to profit is capturing the fluctuations between support and resistance.
If there is an upward trend in the market, and a bullish pin bar forms at the support level, then the take profit should be set at the next key resistance level.
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