I once thought I was an unafraid captain in the sea of cryptocurrencies until that "312 Black Swan" caused my ship to sink. A 5 million position wiped out in half an hour, the cold touch of the phone screen still lingers. Now I have achieved financial freedom!
But despair is often the catalyst for wisdom, leading to a sudden realization: the essence of contracts is probabilistic gaming. With the remaining 800,000 capital, combining the 'dynamic hedging model,' in February this year, I achieved an asset leap to 2.18 million in 60 days, a gain of 272,900%!
Now, I will share this "swing trading strategy" for free—learning to dance with risk in the cryptocurrency world is the true path to survival.
Whether swinging or trending, it is crucial to know where the entry and exit points are! This is the key to success!
Some people have a precise entry point but don't know when to exit, making profits without actual earnings. Ultimately, whether in a large swing, small swing, or an entire trend, the core principles are no different.
The entry point can refer to previous articles about bottom fishing. As for how to control the exit point, it generally divides into left-side trading and right-side trading.
If you have accurate judgment, you can choose left-side trading. The advantage is that you won't incur losses, just a matter of gaining more or less. The downside is that you may capture small gains but miss out on larger opportunities. If you are unsure how much this cryptocurrency can rise, then choose right-side trading, where the advantage is capturing the entire swing, but the downside is potentially facing larger drawdowns, which also greatly relates to the market maker's strategies.
As shown: a complete swing may include many smaller swings, such as wave one, wave two, and wave three. For example, if point A is the entry point, after generating profits at point B, one can exit or exit at point C, which would be left-side trading.
If one enters at point A and exits at point D, it constitutes right-side trading.
Left-side trading captures only a segment, while right-side trading often represents a full trend.
How to determine if it is left-side or right-side?
The entry point is not detailed here; you can refer to previous articles on how to bottom fish. The standard is: the K-line crosses above the 120 line, a golden cross of moving averages, and MACD crosses above the water line, as illustrated below.
The second image also depicts a typical 'kick-out big dark horse' pattern.
At the exit point, those who can trade from the left-side usually have a good instinct for the market and exit when the time is right. If you're unsure and want to trade left-side, you need to consider indicators: watch the volume; a sudden massive spike indicates it's time to leave. If the volume increases slowly, congratulations, your profits are likely substantial. Wait for a sudden surge or a decrease in volume before exiting!
For instance, the above image shows a sudden surge in volume, which often leads to a quick exit. When the price retraces to a suitable level later, it can be re-entered; such movements often serve as the starting gun or charge signal for a trend.
In summary, one principle: be cautious when there is a sudden massive volume spike.
So how do you determine when the swing has ended?
"The 'head' has appeared, indicating the end of the swing. Where is the 'head'?"
Bottom fishing follows a principle: if it doesn't create a new high, it's bad news!
In the above image, when point B appears, it indicates that the head has already formed, and the exit point at point C corresponds to right-side trading.
The logic behind the appearance of a 'head': the market maker has distributed most of the chips before point A, having already harvested enough profit. The remaining chips are insufficient to push for new highs. After a deliberate rise at point B to distribute the remaining chips, it's a free-for-all among retail investors; without the support of the market maker, prices can plummet!
The following shares a comprehensive and in-depth analysis of cryptocurrency trading strategies, covering various common strategies such as day trading, futures trading, high-frequency trading, etc., with a focus on swing trading. It not only elaborates on the definition, characteristics, advantages, and disadvantages of swing trading but also compares it with other major trading strategies, providing rich and practical guidance for novice traders. Furthermore, the article analyzes the pros and cons of cryptocurrency trading, helping readers gain a comprehensive understanding of this field.
1. Cryptocurrency trading strategies
Introducing a series of trading strategies widely applied in the cryptocurrency field:
1. Day trading
Day trading requires entering and exiting market positions within the same day, aiming to profit from small market fluctuations. However, this strategy is time-consuming and high-risk, making it more suitable for advanced traders.
2. HODL (buy and hold)
This is a long-term investment strategy where investors purchase cryptocurrencies and hold them for an extended period to benefit from the appreciation of the asset's long-term value, but one should note that cryptocurrencies have a relatively short history and carry certain risks.
3. Cryptocurrency futures trading
Involves both parties entering into a contract agreement to buy and sell a specified quantity of underlying cryptocurrency at a predetermined price on a scheduled date and time, allowing traders to participate in trading without owning actual cryptocurrencies.
4. Arbitrage trading
Traders profit from price differences of cryptocurrencies across different markets but must bear multiple transaction fees and precisely grasp the timing of price discrepancies.
5. High-frequency trading
Relying on algorithms and trading bots for quick entry and exit, suitable for experienced traders, including arbitrage, market making, liquidity detection, and momentum trading types, but may affect liquidity and increase volatility during market fluctuations.
6. Dollar-cost averaging (DCA)
Traders who regularly make small incremental investments can balance risks amid market fluctuations, but transaction costs are relatively high in the long run.
7. Reselling trading
Profiting from market inefficiencies requires high trading volumes. Traders need to pay attention to margin requirements and rules and tend to prefer highly liquid markets.
8. Range trading
Investors determine the buying and selling price range of cryptocurrencies within a short period, profiting through repeated operations until prices exceed the expected range.
9. Index investing
Diversifying risks through investing in cryptocurrency index funds, but still carries risks higher than government bonds and fiat currencies.
10. Swing trading
Swing traders hold positions for about a week or a month amid market fluctuations, developing strategies based on fundamental and technical trading indicators. While daily trading is not required, continuous market assessment is necessary.
11. Trend trading
Holding positions for months to profit based on market trend signals, suitable for beginners, but thorough research and analysis are needed before trading.
2. Advantages of trading cryptocurrencies
1. Severe price fluctuations
High volatility attracts speculators and investors, potentially leading to significant profits, but also comes with high risks, such as sudden price drops causing losses.
2. Near anonymity
Online trading requires no disclosure of personal information, which protects user privacy to some extent, although exchanges still have their own KYC measures.
3. Programmable smart features
Provides holders with benefits such as ownership restrictions, voting rights, etc., and may include rights to physical ownership.
4. 24-hour market
The cryptocurrency market is decentralized, open seven days a week, 24 hours a day, allowing trading from various global locations.
5. Peer-to-peer trading
No need for financial institutions as intermediaries, reducing trading costs and appealing to some users.
3. Disadvantages of trading cryptocurrencies
1. Cybersecurity issues
Vulnerable to hacking attacks leading to asset theft, necessitating constant enhancement of security infrastructure and cybersecurity measures.
2. Scalability issues
Trading quantities and speed are limited, potentially leading to delays and affecting traders' operations.
3. Regulatory challenges
Lack of a comprehensive legal structure for asset protection, leaving investors with insufficient market safeguards.
4. Best ways to trade cryptocurrencies
There is no absolute best trading method; the choice should consider financial goals, risk tolerance, asset class preferences, trading knowledge, and other factors. Before deciding on a market strategy, one should clarify their preferences for risk and return.
5. Detailed explanation of swing trading
1. What is swing trading?
It is a trading strategy aimed at capturing mid to short-term price movements, with traders operating over a few days to weeks to profit from price fluctuations.
2. Comparison with other trading strategies
Compared to day trading: day traders are like sprinters who make multiple quick trades in a day, relying on technical indicators and complex chart systems to seek quick profits; whereas swing traders are more like surfers, with relatively more time and a broader perspective.
Compared to long-term investing: investors are like marathon runners, focusing on fundamental analysis, holding positions for months or even longer, with relatively lower risks but slower profit acquisition; swing traders seek a balance between the two.
3. Indicators and tools used by swing traders
Technical indicators: Moving averages help determine trend direction; relative strength index (RSI) and other oscillators can indicate overbought or oversold conditions, revealing potential trend reversals; chart patterns like flags, triangles, and head-and-shoulders can be used to identify trends, discover reversals, determine entry and exit points, and manage risks, while combining with other technical indicators can enhance the effectiveness and reliability of the patterns.
Chart patterns
Narrowing down to view a longer time frame reveals two different head-and-shoulders patterns, indicating a loss of momentum and suggesting a bearish reversal.
These patterns have two smaller peaks on either side of a larger peak, making them appear like heads between two shoulders.
We draw a line connecting the lowest points of the two shoulders, called the neck line.
When the price breaks below the neck line, the pattern is confirmed, indicating it is a good time to sell.
Thanks to our volatility trading strategy, we identified temporary trend reversals during Bitcoin's long-term bullish trend, allowing us to execute at least two successful trades. These signals may be invisible in a shorter time frame but can be missed in a longer time frame.
4. Advantages and disadvantages of swing trading
Advantages: No need to constantly monitor the market; limited weekly trading time can still yield considerable profits, suitable for traders looking for side jobs while seizing price fluctuations in different market environments.
Disadvantages: May face swap fees, especially when holding positions into the next trading day; weekend markets pose uncontrollable risks.
5. The best tools for swing trading
Applicable to various trading tools such as stocks, currencies, commodities, cryptocurrencies, etc. The volatility and efficiency of different tools vary; forex currencies usually have lower volatility. The choice should be based on one's familiarity and market trends.
6. Examples of swing trading
Taking Bitcoin as an example, by observing the charts from March to April 2024, one can identify the transition from a bullish to bearish trend using technical analysis tools like head-and-shoulders patterns, successfully capturing at least two trading opportunities.
Moving averages are simple indicators for swing traders to determine trend direction, with various choices.
One can pair fast and slow moving averages, waiting for a crossover. When the short moving average crosses above the long moving average, prices are expected to rise; when the short moving average drops below the long moving average, prices are expected to fall.
One can use just one moving average to observe the relationship between price and the average to gauge the trend. If the price is above the moving average, it indicates an upward trend; if below, a downward trend.
Moving averages can also serve as support or resistance levels—buying when the price falls to the moving average in an upward trend and selling when the price rises to the moving average in a downward trend.
6. How swing traders make money
By capturing price fluctuations over days to weeks, trading positions lie between day traders and long-term investors. Trading decisions rely not only on technical analysis but may also involve fundamental analysis, commonly utilizing indicators like moving averages, relative strength index (RSI), Bollinger Bands, and Fibonacci retracement tools. Traders usually refer to charts over medium to long time frames to confirm trends while paying attention to short time frame charts to determine specific buy and sell prices. However, different traders' strategies and methods can vary significantly.
7. Differences between day trading and swing trading
Day traders focus on exploiting short-term price fluctuations, frequently monitoring the market and relying almost solely on technical analysis. In contrast, swing traders pursue larger price movements, monitoring less frequently and usually combining technical and fundamental analysis. Investors may base long-term investment decisions primarily on fundamentals.
8. How to get started with swing trading cryptocurrencies
For beginners, swing trading is a relatively ideal choice as it has a moderate time frame, allowing for calm decision-making and trade monitoring. Beginners can first learn (a comprehensive guide for cryptocurrency trading beginners), master trading knowledge and skills, and then engage in simulated trading on the Binance contract testnet to gain experience without risking capital. Once fully prepared, they can conduct actual trading on suitable cryptocurrency trading platforms like Binance. When selecting a platform, consider whether the trading pairs, contract types, and leverage tools meet your needs. Meanwhile, beginners should emphasize risk management during trading and learn to use stop-loss and proper position sizing methods.
9. Best cryptocurrency trading strategies
Cryptocurrency trading strategies are used to identify profit opportunities, and not all strategies suit everyone. It is crucial to find a strategy that aligns with one's style, risk tolerance, and financial goals. This article explores some of the best strategies to increase the chances of success.
1. HODL: a long-term holding strategy suitable for investors who believe in future market growth, requiring patience, discipline, and the ability to endure short-term volatility. This is a popular strategy for Bitcoin and others.
2. Day trading: buying and selling within one day, utilizing short-term fluctuations for quick profits, requiring discipline, quick decision-making, and understanding market trends, suitable for experienced traders with high risk tolerance.
3. Swing trading: holding for a few days to weeks to profit from mid-term price fluctuations, requiring patience, discipline, and analytical skills.
4. Scalping: high-frequency, short-term buying and selling for small profits, requiring quick decision-making and familiarity with the market, suitable for experienced traders with high risk tolerance.
5. Position trading: holding for months or even years to profit from long-term growth, requiring patience, discipline, and the ability to endure short-term volatility, relying on fundamental analysis.
6. Arbitrage trading: exploiting price differences across exchanges, requiring quick decision-making, multi-exchange operations, and trend analysis skills.
7. Automated trading: using software programs for automatic execution, requiring knowledge of programming, market trends, and trading platforms, suitable for experienced traders with high risk tolerance.
The cryptocurrency market is highly volatile, so it is essential to study and test different strategies and evaluate their performance to find the most suitable one.
Conclusion
Swing trading is a commonly used strategy in cryptocurrency trading with certain advantages, suitable for beginners to try. However, the choice of trading strategy should align with one's trading style, risk tolerance, and investment goals. Before starting trading, it is crucial to learn risk management principles, which help navigate the volatile cryptocurrency market steadily, reduce potential losses, and increase profit possibilities.
The cryptocurrency circle is like a marathon; steadiness is better than speed. Those who earn money by luck often lose it back through skill. Only by ingraining position management into your DNA can you survive in this cutthroat market. Remember: staying alive gives you a chance to turn things around.
Even the most diligent fisherman would not go out to sea during a stormy season but would carefully protect his fishing boat. This season will eventually pass, and a sunny day will come! Pay attention to Yan'an, who teaches you both to fish and how to fish. The cryptocurrency world is always open; by following the trend, you can lead a successful life. Remember it deeply!