Swing Trading Crypto Guide
Swing trading crypto has taken the world by storm in recent years. The concept’s novelty and the volatility demonstrated by large price swings make it an attractive market for aspiring investors. However, it is understandable that some budding traders are still apprehensive, asking questions about whether cryptocurrency trading is worthwhile or just a zero-sum game. This swing trading crypto guide will explore what digital currencies are, how it all works, plus what to look for in the top brokers and exchanges.
Our two favourite crypto brokers in 2024 are Coinbase and Binance.
Crypto Currency Brokers for United States
What Is Cryptocurrency?
Crypto is a digital currency that exists on a blockchain – a distributed online ledger consisting of blocks that record all transactions and exchanges. Each block is formed individually and linearly appended to the existing chain. This means that any past blocks and recordings are immutable.
The governance of blockchains is also key, inherently avoiding the possibility of a single controlling party. Instead, ownership and control of the blockchain’s future are distributed amongst interested parties (those holding the crypto), known as nodes. The majority of nodes must agree for changes to be approved and implemented.
The first crypto was Bitcoin, which launched in 2009 to create a digital alternative to physical fiat currencies. Since 2009, thousands of other cryptos have been launched, many with different purposes. For example, Ethereum is a crypto with a large decentralised network of different services that range from financial applications and artwork (NFTs) to games. Other altcoins, such as Litecoin, were created to be used regularly for day to day purchases, such as buying a coffee or paying the bill at a restaurant.
When swing trading crypto, traders watch out for two crucial swings: swing lows and swing highs:
- Swing lows – This is when the crypto market dips and begins to bounce upwards. Traders often find it a good opportunity for placing long trades.
- Swing highs – This is where the crypto market hits its peak before it starts retracing. Traders often find it a good opportunity to place short trades.
Swing Trading Crypto Approaches
Investing
Those looking at swing trading crypto over longer timeframes may find that physically purchasing and holding tokens could be the best option. This approach tends to only be available without leverage, though high volatility can still produce profits.
Investing will likely involve mining fees at the time of purchase and sale, though no deadlines or overnight interest or holding fees are incurred. This approach is also limited to bullish speculation, with short positions unavailable.
Purchasing tokens and transferring ownership will require the use of a crypto exchange, rather than a derivatives broker, and some form of storage wallet.
Storage
Owning some crypto tokens requires a special form of digital wallet in which to hold them. These can take many forms and some entry-level exchanges will even integrate their own wallet service to ease the process. Unfortunately, some fear that exchanges are easy targets for hackers and thus hold their tokens externally in either a third-party hot wallet or a physical cold wallet.
Hot Wallets
Hot wallets are digital wallets that stay connected online, for example, MetaMask. These software wallets facilitate fast crypto trading as they can connect to exchanges quickly. However, this easier access comes with a greater risk of hacking, as the wallet is always connected to the internet. Popular hot wallet examples include Exodus, Binance Chain Wallet, MyEtherWallet and Mycelium.
Cold Wallets
Cold wallets are safer methods that store your crypto in code on a physical device that can be disconnected from the internet, such as a hard drive. These are more secure than hot wallets as they are completely offline and so can only be hacked when plugged in. However, as these are physical wallets, you must be careful not to misplace the drive as you risk losing the crypto stored forever. Popular examples include the Ledger Nano X and the Trezor Model T, both of which are ideal for swing trading crypto.
Derivatives
The use of financial derivatives when swing trading crypto opens up several opportunities and facilitates a high-risk, high-reward form of speculation. Crypto derivatives most take the form of contracts for difference (CFDs), though options, binary options and futures are also all available. Derivatives usually allow you to leverage your positions, boosting your earning potential by increasing your position sizes, though with the risk of magnified losses.
Derivatives do not require you to sort storage of your assets as you do not take ownership of the tokens. Instead, you take out positions with a suitable broker and profit or loss from price movements. Also, derivatives allow you to take both long and short positions, providing profit opportunities for coins that decrease in value.
Strategies
The following are commonly used swing trading crypto strategies.
Catch the Wave
This swing trading crypto strategy aims to catch a move in the trending market. Crypto swing traders enter the trade immediately after the end of a pullback. Traders identify a possible trend by using various technical indicators, such as the 50-period moving average.
For instance, if the Ethereum market moves towards this moving average, crypto traders anticipate a bullish move. As a result, they go long in their next candle. One excellent principle is setting a stop-loss underneath the candle low. You can also set a take-profit immediately before the crypto market hits swings high.
Stuck-in-a-Box
This strategy involves following the market range using resistance and support levels. The cryptocurrency market is often said to have been ‘stuck in a box.’ The reason is that it lies between two lines below and above.
Once the crypto price goes below support, traders anticipate a decisive price rejection. As a result, they go long on their upcoming candle open(s). The ultimate goal is to exit a crypto swing trade before its selling pressure hits the resistance line.
For this crypto swing trading strategy to work, traders must have a good understanding of resistance and support levels and their daily candlestick charts. Additionally, a take-profit and stop-loss ensure that the traders do not exceed the two levels.
Comparing Swing Trading Crypto Brokers
Coins & Tokens
Platforms, exchanges and brokers all offer different cryptocurrency tokens, whether through spot purchases or derivatives. If you are looking for popular cryptos like Bitcoin and Ethereum, you will have plenty of options to choose from. However, if you wish to trade less popular coins, such as meme tokens like DogeCoin, you may need to be a bit more rigorous in your search.
Those looking at swing trading crypto via investing must first find an entry-level exchange, which is a platform that facilitates crypto purchases using fiat currencies. You can then stay on the same exchange or take your crypto to other exchanges that may offer better fee structures or asset ranges. Common entry-level cryptos include Bitcoin (BTC), Ethereum (ETH) and Tether (USDT), which is a stablecoin tied to the value of the US dollar.
Some brokers may offer more sophisticated instruments that allow for swing trading crypto on a larger scale, such as ETFs and indices. These incorporate the values and market capitalisation of a wide range of tokens to produce a metric for the general market sentiment of cryptocurrencies.
Fees & Limits
There are several charges to consider when deciding amongst swing trading crypto platforms. These include maker and taker fees, deposit and withdrawal costs, mining charges and overnight fees. Mining charges and maker and taker fees are charged every time crypto is physically purchased or sold. These work to reimburse those operating the blockchain and provide incentives to crypto holders to provide liquidity services. These costs are not applied to derivatives, only spot trades, and can quickly add up for those making frequent trades.
On the other hand, derivatives like CFDs often incur overnight funding and swap fees, which act as interest payments to brokers for holding positions open overnight. These will compound over time, so it is often best to open long-term positions by purchasing crypto. Brokers will often vary the swap rates they charge and low fees can make a large difference to your swing trading crypto profits. For example, Kraken has low rollover fees of 0.02% or less for margin trades.
Another consideration is the minimum investment amount as some crypto platforms have high limits of $100 or more. However, you can find platforms with low limits, such as Revolut, which accepts investments from as low as $1.
It is important to consider each type of charge in relation to your goals and intentions to accurately find the platform, broker or exchange that will demonstrate the lowest fees over your trading career.
Safety & Security
Keeping your accounts and funds secure is a vital consideration when swing trading crypto. Software platforms should incorporate features like stop-losses and two-factor authentication (2FA), supporting simple risk management and account login verification, respectively.
Brokers and exchanges should also demonstrate a high level of security. Keep an eye out for encrypted data, segregated funds and, if applicable, regulatory oversight. Decentralised exchanges are popular amongst investors as they allow for anonymous trading and crypto swapping. These can also open the doors for traders under the age of 18, without the need for ID.
On the other hand, centralised exchanges are often regulated and must conform to predetermined levels of security and privacy. In addition, the use of regulated brokers and exchanges often comes with insurance against insolvency and avenues for legal recourse.
Reviews
User reviews of platforms and brokers for swing trading crypto are a great way to see how a particular exchange works and what the trading experience is like without signing up. There are many crypto trading communities online that you can speak to on social media sites such as Quora, Twitter and Facebook. Reddit forums, Telegram groups and Discord servers are also all great options for in-depth discussion.
Promotions
Multiple crypto trading platforms offer reward programmes through bonuses and sign up offers to incentivise people to register for an account. While these are usually only small amounts of crypto, they can be a good way to start. Other more entertaining schemes come in the form of a quiz or so-called “play-to-earn (P2E) games” in which users can earn crypto.
Features
The features and extras that a swing trading crypto exchange offers can help to greatly improve your experience. If the platform has a mobile app, you will be able to access your account and make trades on the move. However, this may not be a priority if you aim to open and close positions using your desktop computer, laptop or Chromebook, for example.
Some CFD and derivatives brokers may provide the MetaTrader 4 (MT4) trading platform, which is a world-leading platform boasting one-click trading and a customisable interface. One thing that can impact user experience is the dashboard and how simple the user interface is. Having a website that is busy with irrelevant images and quotes can distract you from crypto trading. Therefore, a sleek and refinable system is key.
Information
Information and analysis can help to improve your earning potential. Many platforms include their own education and analysis sections, including charts and graphs, price history, crypto trading volume and order book history. Further helpful tools include profit calculators, risk management features and live news streams.
Rules & Regulations
Currently, the rules and regulations for crypto trading are not as extensive as for forex or stocks and shares trading, as it is still a relatively new market. Moreover, decentralised finance (DeFi) is just that, decentralised. This means that no government can track, monitor or restrict crypto purchases (unless you use regulated derivatives brokers). With that said, governments are slowly catching up and beginning to introduce rules and restrictions.
The UK
The FCA has introduced a ban on the sale of all crypto derivatives. This means that regulated exchanges cannot offer cryptocurrency CFDs, options or futures. However, UK traders can still speculate on crypto markets using derivatives products from offshore brokers.
Cryptocurrencies themselves do not fall under regulation, so any lost funds are not covered by customer protection laws. While purchasing, holding and trading crypto assets is legal in the UK, HMRC has announced that its tax policy may evolve in the future. As it stands, however, swing trading crypto is a valid option for investing if you do not wish to open a stocks and shares ISA.
The USA
The SEC labels cryptos as securities and so treats them as such. Crypto exchanges operating in the US must be regulated. In New York, companies must acquire a BitLicense to operate crypto trading activities.
The EU
There are plans to introduce laws so that only regulated brokers and platforms may offer crypto trading. This is under the “Markets in Crypto-Assets Regulation” (MiCA) proposal that will introduce customer protections against market manipulation relating to cryptocurrencies. It will also help to address to lack of customer protection for decentralised exchanges.
India
Cryptos were previously banned by the Reserve Bank of India. In March 2020, India reversed the ban and swing trading crypto became legal again. However, there have been more discussions recently over an outright ban of all crypto-related activities, including trading, holding and farming, resulting in fines for those who take part.
Taxes
You must remember to pay tax on any of your earnings from crypto trading, if applicable. For USA-based traders, you do not have to report every purchase of crypto or trade. However, if you convert back into fiat currency to secure your profits (or losses), you must report it. For each country, the taxation rules may be different, so it is important to check the laws where you reside before you start trading.
Swing Trading Crypto For Beginners
If you are new to swing trading crypto, here are a few tips and tricks to help you on your way.
Strategy, Education & Analysis
Knowledge is power when it comes to financial speculation. You cannot accurately predict the movements of the cryptocurrency markets if you do not understand what it is and how it works. Therefore, take some time to get to know the technology behind crypto, blockchain and NFTs. This can also help you differentiate between different tokens as not all will be relevant for your investment purposes. There is a lot of swing trading crypto-related jargon, so we recommend that you learn the meaning of the keywords before you start trading.
Once you have learnt what crypto is, you can start looking at the trading side of things. This involves researching and evaluating different strategies so that you can lay out some rules for making trades and staying focused. Example strategies include two-theory, S-Corp and quant crypto trading. It may also be useful to see what experts have outlined out for their nine rules of crypto trading. Reviewing crypto price history can be helpful as you can think about the trades you would have made in a given situation to test your strategy.
Having a strategy does not guarantee positive results and you should remember that the price history of an asset is no indication of future performance. You could be just as likely to see large profits by executing trades at random by following the actions of a crypto trading hamster with a Twitch stream such as Mr Goxx (who outperformed the S&P 500). For more strategy information, such as strategies, a PDF guide for dummies or additional tips, look to Reddit, forums and YouTube channels. The best crypto trading YouTube channels, such as KS Masterclass, will also help you learn how to understand live data and engage in swing trading cryptos.
Resources
Many online resources can provide useful advice and help. There is a plethora of podcasts, video channels, e-books, and PDF guides available. Most are free to download, though some may require payment. For example, Udemy is a popular training academy with a library of educational resources created by experts and mentors. One popular course with positive reviews is the Crypto Trading 101 course, which consists of a series of lessons and video tutorials. Paid courses often include the opportunity to ask questions of experts and obtain strategy ideas from successful swing traders.
Online resources are not just for beginners, either. Many tools cover advanced systems and strategies like recognising W and M patterns, understanding RSI indicators and signals and level 2 data will be explained.
If you are unsure which resource is the best, then there are websites and social media pages discussing where you can find the number one, top three or best five apps, books, bots and platforms for 2024.
Find the Right Token
The cryptocurrency market is expanding yearly. Currently, there are more than 7,000 tokens available. Some crypto coins are more volatile, while others are less volatile. When swing trading crypto, consider coins with high market capitalization. They are typically the most traded tokens on various exchanges and marketplaces. Bitcoin (BTC), Tether (USDT), and Ethereum (ETH) are some of the best cryptocurrencies to start with.
Copy & Social Trading
Novice traders often struggle to establish their cryptocurrency portfolio. It takes time to master swing trading crypto strategies and crucial concepts that can improve trading decisions. That’s where copy trading comes in and plays an integral role in enhancing investing skills.
Finding a crypto broker that offers copy trading allows traders to share their investing ideas with their fellow traders and copy from other successful deals. This feature is perfect for beginners as they slowly find their feet when swing trading crypto.
Practise
Some platforms, such as eToro, offer a simulator or demo account with which you can practise swing trading crypto products. These are useful, risk-free ways to test your strategies and explore new markets and tokens. The virtual, demo funds can be used as if they were real, providing a good opportunity to make mistakes from which you can learn.
It can be helpful to keep a journal of your trades to review your successes and failures. You should log information likes entry times, each entry point, what the trade was, why you made it, exit times, each exit price, profit/loss and why you exited at that time. This can help you wrap your head around the basics of swing trading with crypto assets using real funds. There are also many free excel spreadsheet journal templates available for download online.
Robots
Trading bots, or “algorithm bots”, are a good way to passively engage in swing trading crypto tokens. You input rules and a strategy that you want to adopt and the robot will execute trades on your behalf. This is an ideal option for traders that do not have the time to spend all day researching and investing.
Additionally, robots can execute trades outside of usual trading hours in any time zone as crypto markets are open 24/7, 365 days a year. This includes on weekends. Trading bots exist for all types of swing trading crypto strategy, including one-minute and five-minute trading, one-per-day and one-per-week.
However, it is important to remember that this is not without risk as the market is highly volatile and not everything will pay off. You should also consider that some algorithms can be expensive and require some initial funding to set up. Some examples of well-known bots include 3commas, E-Lot Automated and Royal Q. To find out more about these, there are plenty of reviews available online for their 2024 versions.
If you do not wish to buy one, you can build your own crypto trading bot. There are vast numbers of tutorials online on websites like Reddit that show you how to code and build your own bot using Python or Raspberry Pi 4.0, for example. Most platforms provide their API documentation on Github, which you will need for coding and integrating a bot.
News
Announcements, events and news are all things you should keep an eye on as they can influence the values of cryptocurrencies. Look out for what popular crypto traders, personalities, firms and limited companies are saying. Look out for certain tokens to become valid as payment by companies, cities or countries. Examples include when Bitcoin was accepted for city fees in Zug, Switzerland and the Australian payment app Zip. When you are practising, get into the habit of reading the news today when you wake up so you can start preparing trades for the day.
Bottom Line on Swing Trading Crypto
Cryptocurrency trading is a big task that comes with a lot of risks. It is a highly volatile asset that has the potential for both large profits and massive losses. It is still a relatively new market, especially compared to investing in stocks and shares. Because of this, there are still new ways to invest such as with the crypto 300 trading club. Beginners should take care to boost their knowledge by practising with a demo account and learning about strategies, graphs and analysis before they start.
FAQ
Is Swing Trading Crypto Halal Or Haram?
Crypto trading is halal according to many Islamic scholars. This means that, under Sharia law, Muslims can purchase, hold and sell cryptocurrencies. This extends to Muslims across the world, not just in countries and cities such as Dubai, Kuwait and Qatar. However, some derivatives activities are halal, such as trading CFDs with overnight swap fees.
Where Can I Find Price Information For Swing Trading Crypto Pairs?
Charts and price history is available on most platforms and exchanges. You can also look at websites such as CoinMarketCap and TradingView, which will show you helpful token information. Examples include USD pairs with 1INCH, XTD and XRP cryptos.
Are There Swing Trading Crypto Platforms With Zero Fees?
It is unlikely that you will find a swing trading crypto exchange upon which you incur no charges. If you do find a platform that has 0 commission trading, it is likely the trade will have very high spreads, greater than the industry average. This essentially acts as a fee to keep the platform competitive in the market.
What Is The Best Swing Trading Crypto App?
There are many good swing trading crypto apps available and each will have its own benefits and drawbacks. While there are helpful lists online, such as the top five apps in India or the UK, for example, you will need to determine what you want from an app and find what suits you best. Websites such as Reddit and other social media are full of helpful discussion and comparison of trading apps. Coinbase and Binance are two of our best picks in 2024.
Where Is Swing Trading Crypto Legal?
Purchasing cryptocurrency and swing trading derivatives is legal in most corners of the world. This includes the UK, New Zealand, Zimbabwe and EU countries like the Netherlands. Even where restrictions are in place, they tend to focus on crypto derivatives and the brokers themselves, rather than traders. With that said, some countries like China do not allow any activities relating to cryptocurrencies.
Can I Swing Trade Crypto On Robinhood?
Many traders often ask does Robinhood allow swing trading? Well, yes, you can swing trade crypto on Robinhood. Find out more about swing trading crypto on the Robinhood website. Remember that this website is only available to users in the U.S. So, if you’re in a different country, you should consider trading platforms supported in your jurisdiction.
Which Is The Best Swing Trading Bot For Crypto?
3Commas is one of the best bots for swing trading crypto. It comes with multiple technical features that help traders trade faster and efficiently. 3Commas is a customizable online-based trading bot that supports various crypto trading strategies. However, suppose you’re searching for a uniquely automated crypto trading bot. In that case, Bitsgap is an excellent choice for traders of all experience levels. What’s best about it is that new users enjoy a free 2-week trial period before paying upgrading to premium.
Is Swing Trading Crypto Profitable?
Swing trading crypto can be one of the most profitable trading strategies. The case is so because traders take advantage of the volatility of cryptocurrencies. However, you need to use several crypto trading tools, strategies, and perhaps luck to make these profits.
What Is The Difference Between Day Trading And Swing Trading In Crypto?
The main difference between the two crypto trading styles is the time frame. Crypto day traders target profits from short-term price changes (usually within one day). Therefore, they tend to stay more active than swing traders, who typically leave their positions open for a couple of days, weeks, or even months. While day traders focus more on technical indicators, swing traders primarily use fundamental indicators.
What Is Better Between Swing Trading In Crypto And Day Trading?
Some crypto traders prefer carrying out their trades within a day. Others like it best when they hold their trades for several days. Similarly, while some crypto traders thrive better in high-pressure trading environments, others take passive trading approaches. Therefore, the definition of what’s better between swing trading crypto and day trading relies on the investor’s preferences.