Regardless of the asset class you’re trading, every trader enters and exits the market in a unique fashion tailored to them.

A trader’s strategy is their approach to a trade in which certain conditions must be met to open a position. There’s no wrong way to trade, testing out various indicators and trading styles can help a trader find a profitable game plan that works for them.


As a novice trader, you must consider the time you’re willing to analyze charts and monitor your positions. The cryptocurrency market is open 24/7, so traders can choose to keep track of various timeframes on a custodial exchange. Day trading involves buying and selling assets within the same day, and traders keep track of price movement on shorter time frame settings (ie: the hourly or 30-minute timeframe).


Of course, you can hold assets for longer than 24 hours as well, traders utilizing longer timeframes tend to trade momentum shifts known as “swings”. Swing trades can last from a few days to weeks or even months. We’ll cover the difference between the two and the benefits that both have to offer.


TIMEFRAMES


The timeframes on a chart represent the intervals in which new candlesticks are created in a particular setting. Once a 60-minute interval has concluded on the hourly time frame, a new candlestick will begin to take form following the transactions that take place within the next interval.



 

Looking at the illustration above, we can see the timer below the asset price is standing at 42:12; that is how much time there is left in the current interval represented by the green candlestick. Each candlestick represents an individual interval for whatever time frame you are viewing.


On the daily chart, each candlestick represents a single day, and on a weekly chart they each represent a week; the same goes for the monthly chart and so on. The letters on the top of the screen (O, H, L, and C) represent crucial price points for Bitcoin within the last hour.


The letter O stands for the opening price, meaning whatever the price was when the preceding interval ended (known as a close) was where the next candlestick began. If the price of Bitcoin stands at $37,490 at 1:59 and remains there at 2:00, then $37,490 becomes the opening price for the next hour. The H represents the highest price point that was reached within the duration of the current interval.


Bitcoin opens the next hour at $37,490, and up until 3:00, it touches $38K once and oscillates between $37,500 and $37,900 for the remainder of the hour. The H on the graph for the current candlestick would read $38K since the price never went past that point. The letter L holds the same principle but for the lowest price point of the hour; however, if the price never drops below the opening price, then both the letters O & L will read the same.


Lastly, we have the letter C; this letter represents both the current price in the middle of an interval, as well as the closing price when that interval comes to an end. Looking at the chart above, we can see that the letter C matches the current price above the interval timer.


DAYTRADERS


Day traders enter markets with the goal of capturing small profits from daily percentage changes. This can be tricky as not all assets experience the same market activity as others, so it’s important to get involved in active markets if you want to get in on the gains.


Bitcoin and Ethereum are traded more frequently than smaller altcoins, so finding assets with high volume and volatility work well in the favor of day traders. Timeframes covering the hourly chart and below are typically utilized the most so traders don’t miss those micro-level rallies taking place. If one candlestick on the 4-hour chart rises, that’s four individual sticks that went up on the hourly chart, and eight sticks on the 30-minute chart.


Day traders can get ahead of this trend by monitoring even smaller time frames like the one-minute or 30-second chart to capture positions before the next wave.


SWING TRADERS


Swing traders don’t take trades as frequently as day traders, this class of market participants will buy a position and hold it over a multi-day span; a single trade can last weeks or even months before a trader closes the position. So, whereas a day trader can make about 4-5 trades in a day, swing traders are more likely to take 3-4 trades in a week and monitor them from time to time while they are being held.


Since a swing trade can take more time to unfold, swing traders analyze charts on larger time frames like the daily, 2-day chart, weekly chart, and monthly time frame as well (yearly timeframes aren’t as utilized in the cryptocurrency sector since cryptocurrencies have only been out for a decade, therefore there’s not much information to analyze.) Whenever one candlestick on the monthly chart rises and/or falls, that equates to four candlesticks on the weekly chart, and 30 candlesticks on the daily timeframe.


This method of trading is more passive, so there are more profitable assets to trade than that of a day trader. Assets that have been known to perform well over a longer period of time tend to be the ones that swing traders engage with, daily volume and volatility don’t play much of a role in a swing trader’s game plan as much as an asset’s overall trend direction does.


DAILY PROFITS VS SWING PROFITS


A day trader’s profit margins largely depend on their available capital. The market moves in percentages, and these percentage gains are applied to a trader’s capital that was invested in a particular market.


Let’s say trader A and trader B both accumulate a 5% return on a trade. Trader A invests $800, while trader B invests $15,000; 5% of $15,000 is $750, while 5% of $800 is $40. Quick returns are smaller in percentage, so larger capital margins can enable day traders to make a living off the market.


Swing trades can accumulate larger returns over time than day trades because the duration of the trade stretches over a multi-day span. Assets can move 5% a day on average for 4 days, if a swing trader takes a position, by the fourth day they will have earned a return of about 21%. Capital margins don’t have to be as large since the returns are greater, but the more buying power, the better.