The margin requirement (i.e. capital required to set up a trade position) of all trades that are active in the crypto market should not exceed 3%. In the EU, the new rules on margin stipulated by the European Securities and Markets Authority (ESMA) have pegged leverage for cryptocurrency CFD trading at 1:2, or 50% margin which all big reputable European brokers respect. So how can the 3% exposure rule be applied in a trading environment where leverage is 1:2? Here is an illustration of how to apply the 3% rule using Pepperstone, a popular broker regulated across 3 continents, which provides crypto trading at a 50% margin. Cryptocurrency positions are generally very expensive to set up, as the spread of some crypto assets such as Bitcoin is very large.

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If you use this setting and trade 7 times in a month with 2 winning and 5 losing trades, you would have made 400 pips as a reward, and lost 250 pips as a risk in trade carrying a stop loss. This proves that using high ratios of reward against risk is a good risk management strategy. This rule refers to the risk exposure of an account in terms of margin used in open trades. This leaves you with a profit of 150 pips, despite the fact that more trades were lost than one.

History repeats itself because traders will react to a particular situation in the same way that they reacted to the same situation in times gone by. This is actually the basis for trading chart patterns such as triangles, wedges, head & shoulder patterns, flags and pennants, etc. History repeats itself because human beings are emotional beings who will reproduce the same reactions to an event or a situation as they did in the past. Therefore, if we see a pattern where there are progressively lower highs, converging on horizontal support (i.e. a descending triangle), we will see traders react in the same way as they did when this setup occurred historically.

5.) Most importantly, swing trading levels out the risks associated with the intense volatility of the cryptocurrency market. Any type of trading usually has to factor in the news (fundamental analysis) as well as the price patterns. Trying to trade the news spikes (which is the case in day trading) is a risky affair for retail traders, as they do not have the tools that are available to the bigger players in the market. The news is what determines the long term trend of any asset, and cryptocurrencies are not an exception. Setups that are seen on the charts (technical analysis).

However, trading the news with swing trades usually involves trading the wider perspective provided by such a news release. So what are the most important news events that can shake the cryptocurrency market? In the absence of scheduled news releases as we see in the forex market, the cryptocurrency market and the assets contained therein are therefore subject to a totally different set of news – https://www.pipihosa.com/2023/11/21/binance-got-huge-due-to-u-s-customers-that-was-illegal-u-s-says/ – items. Such perspectives usually play out when the market has been allowed to digest the news content, leading to a more sustained and predictable response. It must be mentioned that there is no economic news calendar for the cryptocurrency market.