We all know the feeling - you buy some crypto, and the price dumps - instead of cowering out of a position that initially moves against you, you choose to sell at a profit later on, the most profitable positions are the ones that work in your favor on the long term. Let’s explore swing trading crypto and derivatives and how you to effectively swing trade crypto.
Disclaimer: We want to emphasize that this is not financial advice. Cryptocurrencies operate in a volatile market, where values can drastically fluctuate in a blink of an eye. It is imperative to conduct thorough research and seek guidance from a qualified financial advisor before investing.
Crypto Trading: What Are Derivatives?
So what are derivatives? Derivatives are securities of which the price depends on the underlying asset, without being the underlying asset itself. Derivatives come with additional features and usually an additional risk.
Crypto Trading: Spot Trading
If you’re new to trading, the best place to start is by just buying crypto and selling it for a profit. This is otherwise known as buy-and-hold or spot trading. You buy and sell crypto on the spot. That means you actually own the crypto you bought until you sell it, either on profit or on a loss.
Trading cryptocurrencies is a risky business. Volatility is high, which means the price can go up or down very quickly. You might wake up 50% richer… or poorer.
Another thing that’s important to know is that when you own an asset, the asset needs to increase in value for you to make a profit. When the price drops, that’s usually regarded as bad news. But it doesn’t necessarily have to be like that.
Crypto Trading: Derivatives Trading
Derivatives trading is a more advanced concept. Where classic crypto trading is about buying and selling cryptocurrencies, derivatives trading is about longs and shorts. The concept is similar but the details differ greatly.
Longing something means speculating that the price will go up and conversely, shorting something means speculating that the price will go down. So hey, we can trade in both directions which is a plus.
In crypto, there is basically spot trading, margin trading, and futures trading. We’ll focus on spot and futures trading.
Swing Trading Crypto: How to Swing Trade Crypto?
Swing trading is fairly easy. There is an enormous buy-the-dip crowd in the crypto sphere. When a currency drops, that drop is usually followed by a strong bounce, creating a V pattern on the chart. This is especially true for BTC, ETH, and ADA, but it is also true of others.
Sometimes the bounce is stronger than the preceding drop, in which case we see even more growth.
Technicals aside, when the price for BTC comes down, you can buy little bits while it drops. This market is still very much growing and for the long term, there is relatively little risk in pursuing that strategy (as long as you can afford to keep money in a position that is down, you can leave your position open).
For futures trading, things become a bit more complicated, mainly due to leverage. Leverage amplifies the position size by multiplying the money you put in, also known as margin or collateral.
Assuming you’re on Binance Futures and you’re attempting to do this trick with a leveraged position, there are some additional things to consider.
- The leverage must not be too high, volatility might kill you
- It’s better to use cross margin mode to avoid liquidation (this also means you can only use a small part of your portfolio, I’d say no more than 10% because losses greater than 100% will eat your portfolio)
- You must be much more aware of expected price action for the coming days or weeks
- You will build your position over time, in particular when the price moves against you
Swing Trading Crypto: Futures Signals
Most use (or have used) signal groups to get signals for crypto trading. Whether you’re in some group for buy/sell signals or for community support while trading, signal groups have been around a while and serve a purpose.
When I joined a signal group, I did it with several goals in mind. I did not have much problems with analyzing the markets but I was looking for confirmation. This is where crypto communities are very valuable. Other people often know better and can at least give you a different angle or point out some things that you missed before, so exchanging ideas is great!
The second reason (for me at least) was to save myself the trouble of doing in-depth analysis and just trade after a quick glance at the charts while doing other duties. Besides, I can’t look at all the charts, there’s always opportunity and we miss out on most of them. Signals are great as a starting point.
Traditional signal groups have a focus on spot trading. Spot trading is buying and selling crypto. Relatively few people are aware that there’s more than spot trading. I mean, spot trading is great, especially when you’re just starting out. Once you get the hang of it though, you may find it’s pretty slow and there’s profit to be made (and lessons to be learned).
Futures trading is the next logical step. While similar to spot trading, futures trading is like spot trading on steroids. Binance has offered futures trading since December 2019, already 3 years ago. And as a consequence, futures signal groups have sprung up.
The thing with futures trading is, it’s much faster than spot and that’s mainly due to leverage. Futures trading inherently invites to scalp (small positions at high leverage for a short duration). It’s a much more active and engaging way of trading than the traditional (forgive me mom) mom-and-pop way of trading that many people are still used to. It’s more of a specialty, but… offers big rewards when done correctly.
For a good signal group, a win rate of over 80% is simply required. If a group offers winning signals, that doesn’t mean all of its members win the trade, but it’s a starting point.
Futures trading requires much more commitment, patience, timing, and willpower to do successfully. Where spot trading groups were nice to have, futures trading with a community is really not optional for most people.
Filthy Rich Futures is my futures trading group. It has an 85-95% win rate. Signals are fast-paced and trading requires some time to get used to. On the other hand, we live up to our name. When we win, we win big. Anything below 50% profit isn't considered interesting to share and profits range up to 5000% in a single trade. Typically, profits range between 200% and 500% on a good trade.
Don’t take my word for it. Check out the top 5 crypto discords here (we’re topping the list).
Swing Trading Crypto: Learn More
Feel like learning more? At Filthy Rich Futures, we do high leverage trading that is inherently very risky, while preaching solid risk management and this very 2% per day rule. If you'd like to join our Discord group, follow the link below!