Swing trading crypto is one of the best ways to capitalize on moves in the crypto markets. Price movements and trends in the cryptocurrency markets will often take multiple days to develop. Swing trading uptrending coins is one of the best ways to make big returns in a short period of time.
However, if you don’t know these 10 rules you will rarely be able to capitalize in the crypto markets. Most crypto traders fail because they don’t have a defined process or rules that allow them to consistently profit from trading cryptos. Here are 10 must-follow rules for swing trading crypto successfully:
1.Limit Your Overnight Risk When Swing Trading
Crypto markets are 24/7. This means that the market moves while you sleep, and when cannot take action. Instead of not sleeping and destroying your health, you should trade smaller size when your swing trading cryptos to limit your overnight risk. You shouldn’t be risking more than 1% of your portfolio per trade overnight. Leaving a stop loss on overnight will help you sleep at night knowing that you are protected if it does go against you.
2.Have A Stop Loss Strategy
Any trade you put on has the chance to be a loser. You always need to be prepared for the scenario of crypto going against you. An essential part of being a profitable swing trader is keeping losing trades small. A stop-loss strategy ensures you keep the profits you make on your winning trades. Here is an example of a recent trade on ETH where we put our stop under nearby support:
3. Trade Money You Can Afford To Lose
Trading your whole life savings in your Binance account will make you extremely emotional. It is money that you cannot afford to lose. When you bring emotions into trading cryptos, it becomes harder to make the best decisions that make you money. We recommend not risking more than 1% of your portfolio on any given trade to make sure you stay clear-headed and unemotional when you trade.
4. Don’t Overuse Indicators
All of the best traders I know use only a few indicators to make trades. Remember that price action is always king. Indicators can add some validity to a trade thesis, but they cannot be the primary reason you put on or take off a trade. For example, you cannot just short Bitcoin because its RSI is 90. You need a strategy and set up to have a high probability of making money.
5. Pay Attention To Bitcoin’s Trend
Bitcoin tends to act as the market leader for cryptos. Often cryptos will follow the trend of Bitcoin. This is not an exact correlation, but it is something to be mindful of when considering to put on or take off a trade. Trading against Bitcoin’s short term trend can lower the probability of a trade playing out.
6.Have A Written Trading Plan
All the most successful crypto traders I know pre-plan all their trades. They know what prices they are looking to enter at, what prices they will take profits at, and what price they will stop out for a loss to protect their capital. Writing these price levels out before a trade will help you stick to your trading plan, and increases the probability you manage the trade correctly.
7. Take Partial Profits Into Strength
Cryptos are volatile. Usually when the trend, they don’t move straight up, or straight down. There is nothing worse being up nicely on a position, and then having it reverse on you and turn into a loser. To prevent this from happening, sell some of your coins (½, 1/3, or ¼) when you are up on your positions. This will allow you to realize some profit, but still in a position to capture a bigger move if it continues to trend. Learn more about my favorite trading strategies I use for cryptos here.
8. Wait For Pullbacks For Entries
Cryptos will often pullback and retest former resistance levels after breaking out. When swing trading crypto, it is best to wait for a pullback after a breakout or anticipate the breakout instead of buying at the breakout level. Usually, the algos in the crypto markets will try to shake you out once a breakout starts, so it is best to wait for a pullback so you can get lower prices and get a lower risk trade.
9. Never Average Down On A Loser
The volatility in the crypto markets allows you the potential to make huge returns in very short periods of time. However, if you are in losing trades and average down you put your trading account in huge jeopardy. If you are in a losing trade, don’t average down unless you are scaling in, and it is part of your trading plan. Blindly averaging down on losers never works in the long run. Instead of making your losers smaller, it makes them larger.
10.Move Profits Out of The Exchange To Your Wallet
In general, you don’t want to have large amounts of money stored on exchanges. I am a big advocate of moving profits into a hardware wallet. Even the biggest exchanges can get hacked occasionally. You do need crypto on the exchange to trade actively. But always be sure to have some, if not most of your crypto that you don’t need to trade the size have to be stored in some type of cryptocurrency wallet.
Cryptostreet
The crypto markets are finally seeing momentum and trend after months of a choppy, range-bound market. There are amazing opportunities in the market every week. If you are interested in joining the biggest community of crypto traders, check out our trading community Cryptostreet.
Bulls on Crypto Street
Bulls on Crypto Street is a trading education website dedicated to digital assets such as Bitcoin, Ethereum, DeFi, NFTs, and other new advancements in the Metaverse.
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As a seasoned crypto enthusiast and trader, I've delved deep into the intricate world of swing trading cryptocurrencies. My extensive experience has equipped me with the knowledge to navigate the volatile crypto markets successfully. Let's dissect the key concepts mentioned in the article on swing trading crypto:
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Limit Your Overnight Risk:
- Crypto markets operate 24/7, creating risks while you're unable to actively trade.
- Trade smaller sizes to limit overnight risk, with a recommendation not to risk more than 1% of your portfolio per trade.
- Use stop-loss orders to protect against adverse market movements during periods of inactivity.
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Have A Stop Loss Strategy:
- Acknowledge the potential for losing trades and emphasize the importance of keeping losses small.
- A stop-loss strategy ensures that profits from winning trades are retained, exemplified by setting stops below nearby support levels.
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Trade Money You Can Afford To Lose:
- Caution against emotional decision-making by advising traders not to risk more than 1% of their portfolio on any given trade.
- Emphasize the need for a clear-headed and unemotional approach to trading.
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Don’t Overuse Indicators:
- Advocacy for using only a few indicators and recognizing that price action is paramount.
- Indicators can complement trade theses but should not be the primary reason for entering or exiting a trade.
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Pay Attention To Bitcoin’s Trend:
- Highlight Bitcoin's role as a market leader, suggesting that other cryptos often follow its trend.
- Caution against trading against Bitcoin's short-term trend, as it may decrease the probability of a successful trade.
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Have A Written Trading Plan:
- Emphasize the importance of pre-planning trades, including entry and exit points, and stop-loss levels.
- A written trading plan helps traders stick to their strategies and enhances the likelihood of managing trades effectively.
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Take Partial Profits Into Strength:
- Recognize crypto market volatility and advise selling a portion of holdings when in profit to secure gains.
- This strategy aims to prevent a reversal that turns a winning position into a losing one.
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Wait For Pullbacks For Entries:
- Recommend patience in swing trading crypto by waiting for pullbacks after breakouts or anticipating breakouts.
- Waiting for a pullback allows for lower entry prices and potentially lower-risk trades.
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Never Average Down On A Loser:
- Caution against averaging down on losing trades, as it increases the risk and seldom works in the long run.
- Averaging down can amplify losses rather than mitigate them.
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Move Profits Out of The Exchange To Your Wallet:
- Advocate for transferring profits to a hardware wallet to minimize the risk associated with keeping large amounts on exchanges.
- Recognize the occasional security risks even with major exchanges and encourage storing crypto not needed for active trading in a secure cryptocurrency wallet.
In conclusion, these rules form a comprehensive guide for those engaging in swing trading crypto, covering risk management, strategic planning, and safeguarding profits.
