A Case Study of a Swing Trade Using FTX Futures
The ideal candidates for swing trading are in general popular momentum stocks. The six-hour webinar, Improving Your Wyckoff Swing Trading Result with Intraday Techniques, provides very detailed strategies for swing trading stocks. Is it possible to apply similar short-term techniques in the low-liquidity environment of cryptocurrencies?
Crypto traders generally fall into two categories: campaigners looking for huge causes and swing traders, the latter generally active in the most liquid market, XBTUSD on Bitmex. Lately, however, new crypto products like the FTX Cryptocurrency Futures are reshaping the way traders can approach intraday and swing trading in this new sector. It’s possible now to swing trade a very wide basket of cryptocurrencies, using the same techniques we employ every day in the stock market. It’s also possible to trade indexes of specific altcoin crypto sectors, like the Exchange Token Index (EXCHPERP on Tradingview), or a basket of cryptos with mid and low capitalization.
As always, we start our analysis with Bitcoin, the king of the crypto market. Look at the range highlighted in red on the chart. Demand is progressively deteriorating and, on September 19th, the up candle marked in red warns us that, after prolonged inactivity, the bearish scenario is about to become a reality. The large demand tail with the intraday penetration of the local support is not a bullish sign: we are witnessing the final exhaustion of the demand. Buyers are exhausted, sellers are temporarily inactive, and the price starts to fall with ease of movement. A bearish feather indicates that a capitulation to the downside is right around the corner. This price action has an uncanny resemblance to the final capitulation in the bear market in December 2018.
We select a weak cryptocurrency for our swing trade to the downside. As you can clearly see on the BNBBTC ratio at the bottom of the chart below, BNB has underperformed Bitcoin during the last three months and in mid-September was in an OB condition in an established downtrend. A quick PnF count of the big distributional structure on the top gives us confidence that there is still room to go down. Our primary goal for a trade like this is to catch the downswing from the overbought condition to the oversold line of the channel.
Using the FTX Future Perpetual BNBUSD contract, you can leverage a trade like this. Here is a closer look at the redistribution structure on BNBUSD with the actual entry point. After the UTAD, demand is exhausted and the price starts to grind down. A break of the local support is a nice POE. This is one of my favorite patterns for short selling: price usually hesitates in a bearish feather and then suddenly plunges through support. If you are a really aggressive trader and you are confident with this setup, you can position a SL on the 5-minute timeframe and increase your leverage using the FTX Perpetual Contract.
In this case, the initial intention was to maintain a short position for more days, but the climactic volume on September 24, as well as the long demand tail, were warning signals to lock in profits. There is always room to improve our trading, and in this case, a better selection would have improved the final gains.