Steemit Crypto Academy | Season 2: week 7 - The Swing trading style || BTC/USDT Trading Pairs

Introduction

Trading is simply buying and selling based on demand and supply and in the financial market, it involves the buy and sell off assets and contracts. Traders can be either be day traders, swing traders scalping traders, and position traders, depending on which of the traders, their styles and aims are different. Before I go on with the assignment by @yohan2on which requires me to "demonstrate my understanding of Swing trading using my knowledge of technical analysis for a Crypto asset pair", I will do a little bit of brushing up so you understand the post.

There are certain rules you need to understand as a trader, things you should be thought as a trading recruit or student so as to help with your money management. These rules are;

• It is a game of money but not a gamble
• You need to know that you have something to lose and you should not lose all in one trade (1% to 5% is good enough for risk management)
• Even when you are not trading with your money but just studying the market, you are trading because you are keeping your money safe and not losing them.

Swing trading on BTC/USDT Trading Pair.

Like @yohan2on wrote in his course that swing traders are traders who trade the market in days, weeks, or months because they fully studied the market and understand it very well. For this assignment, I will be trading BTC/USDT trading pairs.

Trading as a swing trader requires checking the chart for the bigger picture, identifying the trends, and determining entry and exit.

I will be using the BTC/USDT trading pair due to a few reasons which include, It has over 40% of the entire cryptocurrency market domination which means it has more volume, it was the first crypto asset to be launched, giving it a long history from 2008/2009, and it is going to be easier to use technical analysis with it. To do this assignment, I will be utilizing https://www.tradingview.com as it has the necessary tools needed to study the market. I will be using the Binance exchange option of the chart since Binance has a larger volume thereby helping me with a broader view of the chart.

What's your Entry and your exit strategy?

Before I go on with this, you need to understand that the market trend is a swing traders' best friend. You cannot enter or exit the market without first understanding how the market trend works.

A Trend is defined as the direction in which the market moves. There are several types of trends which are the Uptrend, Downtrend, horizontal trends. The uptrend goes up as the name implies, the downtrend goes down, and the horizontal is sideways.

I will be using the Systematic Trend following strategy to enter or exit my trade. Let me state clearly that you do not have control over your trading results but you can control your decisions and actions during the trade. Do not trade without a goal, trading without one is a suicide mission. Before the trade, the entry, exit, and targets are predetermined. A good entry in a trade should be a point with low risk, and it should have a high probability of a favorable movement.

The entry and exit strategy will be the Systematic Trend following strategy where I will be trading based on trend changes.

Multiple time frame analysis

Every trading analysis requires a trading time frame. It is used to identify similarities or differences between the time period of an instrument/asset. While day traders will use the 4 hours, 1 hour, and 15 minutes trading time frames, swing traders use the weekly chart, daily chart, and 4 hours chart.

I will be using the weekly chart to check the entire view of the market, will be using the daily chart to identify trends and the 4 hours chart to determine entry and exit points.

Each candlestick represents a week. It gives a larger view of how the market is doing.

Daily chart helps identify trends and check the market movements in days, and weeks. Each of the candlestick represents 1 day.

A chart to check trends, supports, resistance, divergence, reversal, entry, and exit.

Candlestick analysis and use of other relevant supporting indicators for your trade decision.

Using the weekly candlestick, I was able to go as far as 1 year back and was able to pick the all-time high and all-time low within this period. With all the all time low of $3742.58 on 9th March 2020 and an All-time high of $64951.38 on the 12th of April 2021. With the maket taking a downtrend currently after its previous uptrend.

On the 1 day chart, I check if the trendline follows as expected and of which it did. It was an uptrend until there was a reversal/ correction. The trnd changes after a breakdown from the trendline. At this point, I start to fine strong supports and resistance zones. With the red parrallel lines as support zones and the greens as resistance. At some point, resistance become support.

I will enter a trade based on the 4 hours chart, this trade might go for a few hours, days or weeks, depending on the analysis. For short term or day traders, using the 1 hour timeframe can be a better option but swing trading usually come with great profit. Before entering a trade in any direction, be sure that the trend of he 4 hours is the the same as the 1 hour chart.

On the 4 hour timeframe chart, I find the trend of the chart and crosscheck that the trend meets with both the 1 hour and the 1 day chart. If the trends are different, then do not enter a trade.

If the trend is going up in an uptrend, the next thing to do is to fix my stop-loss manually below every valid higher lows and if the trend is a downtrend, then I will fix my stop-loss at above on every Lower highs. Since the chart started a new tend, I will be setting my stop-loss at the higher lows below the Currenct price. Currently, my manual stop-loss is on $35564.03.

The immediate trend is showing a V-reversal which often reverses a previous trend but this alone isn't enough to enter a trade. Momentum needs to be checked and to do this, I will be using Moving Average Divergence/Convergence (MACD) to check for signal line cross over. From the chart, the MACD line crosses above the signal line and the histogram is showing strong momentum which means that there is more push to buy.

Not neglecting volume, it is visible that the volume is gradually increasing an more buyers are coming into the market but then,I will still confirm with the Relative Strenght Index (RSI).

RSI at 50 shows that BTC is still being bought averagely. At this point, there might be a little sell threrby reducing the RSI or an instant increase in price when it crosses the V-reversal.

Trade management ( Setting stop loss, trailing stop and take profit)

Analysing the market isn't a certainty that the market will go in your favour, in most cases, it will go in the opposite direction and that is where a Stop-Loss is needed. I plan to long/buy into BTC if it goes above $38,471.12 and I will be taking profit at $45631.40 and a stop-loss of $35,564.03.

Conclusion

The market isn't constant, you can only analyse and expect the market to go in accordance to the analysis. Moreover, you need to be sure and not gamble. Trading isn't gambling and always remember to stop losses.