Swing Trading Style

Source: pexels

What is Swing Trading?

Swing Trading is a style of trading that is based on technical analysis of a crypto asset, whereby this crypto asset is held for a long time, in which traders attempt to capture short to medium term profits as they hold these crypto assets.

Swing trading style is unlike Scalp trading where a trader has to constantly open and close positions within a day, and also has to be very active within the day so as to spot different opportunities, open positions regarding these opportunities and finally closing them within a day. In swing trading a trader can open a position for days, weeks and sometimes even months, as he try to capture profits as a result of price swings within these periods.

Most of the traders using the Swing Trading Style, usually assess trades based on how much they would put in the trade, and how much they stand to gain. That is, they analyze the risk to reward ratio while also analyzing the opportunities presented by the swing trading method.
So if a trade opportunity presents itself by which a trader can put $2 and make $8, then this is considered favorable and profitable.

Pros

1. You don't need to spend much time on the screen to spot opportunities.
2. You don't have to open and close multiple positions to increase you profit potential.
3. You tend to maximize you short to medium term gains if you are able to capture enough of the bulk of the market swings.

Cons

1. Open positions are subject to risks incurred by it being open overnight daily, and also during the weekend.
2. When there is a sudden change in market conditions, that is, a market reversals, it can lead to significant losses.
3. Because swing traders focus on short to intermediary term trades, they may lose sight of longer term favorable trades.

Swing Trading Method

This method usually involves looking at higher timeframes such as weekly, daily charts to spot opportunities and then going on to lower timeframes to such as 1 hour, 30 mins timeframe to spot entry, stop loss and take profit levels.

Process

This method usually involves checking higher timeframes such as monthly, weekly, and daily to observe the overall market outlook, in order to get a good perspective on where the market is headed. Then you go to lower timeframes such as 4 hourly, 1 hourly and 30 mins, to look at the movement of the market and make a decision on where to open a position and where to place your stop loss.

In this exercise, i'm working with Ethereum/USD. I have gone across to check its movement on the higher timeframes as well as the lower timeframes to gain better understanding on how i want to place a trade.

Indicators used

Exponential Moving averages - 8 & 34
Support & Resistance lines - Red lines for each timeframe.

Charts

The chart used is the instaforex MT4 trading chart. The pair is Ethereum/USD. I used different timeframes from weekly to 1 hour.

Image 1: Ethereum, Weekly

From the image above, this the weekly chart representation of Ethereum, and we can see that the price of Ethereum has been going down at least for the past two weeks, judging by the two most recent weekly candlestick. This gives that a downward trend is at hand. I got the support and resistance levels of this weekly chart, these are the figures of the support and resistance lines on the chart; weekly resistance line at 3904.20 & support line at 1409.05

Image 2: Ethereum, Daily

On the daily timeframe, the downward movement is very clear, especially with the cross over of the two Exponential Moving Averages. However, the current candle stick is giving bullish signals, but i think this is part of the movement of the bearish market, as in, not all the candlesticks would be red. Here the resistance line is at 4137.43 & support line is at 2202.59

Image 3: Ethereum, 4 Hours

But on the 4 Hour chart the market is currently moving in an uptrend. It is the effect of the movement of this upward movement on the 4 hour chart, that there is a bullish candlestick for the current movement at the time of writing. I also took the 4 hours resistance line at 2909.99 & support line at 1922.59

Image 4: Ethereum, 1 Hour

The upward movement of the trend is also confirmed in the 1 Hour chart and given more backing through the crossover between the Exponential Moving Averages. This movement indicates the sentiments of those trading the 1 hour chart.
The 1 hours resistance line is at 2325.53 & support line is at 1901.74

Image 5: Sell limit & Stop loss orders

So i opened a sell limit order. A sell limit order is a type of order whereby once the market hits that order level, it automatically enters a sell position for you. The sell limit order is the green broken line, while the red broken line on top is the stop loss order.

Details of the orders

Sell Limit - 2685.64
Stop loss - 2696.00

The red line below are the respective support and resistance levels at the higher timeframes. But from this 1 hour chart, we can use them as points of reference on where to take our profits. It could be at the first line below that is after the sell limit order, or the second or third.

Then as the market continues to move in the direction that you have chosen, you continue to trail the market with your stop loss, so that you can make much gains and not lose it when the market retracts.

Thank you @yohan2on for this exercise