SteemitCryptoAcademy Season 3 Week 4 – Course Advanced Homework for @cryptokraze
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Greetings to all in the "SteemitCryptoAcademy", it is a pleasure to be one more week imparting knowledge, due to my role as a teacher in charge of beginners and also as a student, since, this time, I have learned a lot in the master class of one of the teachers of the advanced course, as is @cryptokraze. In this sense, I have witnessed a lecture explaining one of his trading strategies based on the use of dynamic Support and Resistance, which I will be performing to meet the requirements of the teacher.
Without further reference, join me in the course of this publication, to detail all aspects of this strategy:
What do you understand about the Concept of Dynamic Support and Resistance? Give Chart Examples from Crypto Assets. (Clear Charts Needed)
This concept comes from what is essentially a support and resistance, which are sensitive levels where the price usually turns around, this due to a concentration of demand and / or supply at these points, which do not allow the price to follow its path, either upward or downward. Based on this, a dynamic support is exactly the same, the difference is, that these points where the price usually reverses to the opposite direction of that retracement, goes in conjunction with the price movement.
What I mean by this, while the price is making its bearish and bullish undulations in a certain direction, the price is leaving, for example, for an uptrend, higher lows, and instead, for a downtrend, lower highs, these are the points where the price turns around and they are called dynamic because they follow the price. Having this clear, there are several tools to follow the trend and follow these levels of support and resistance. These tools are:
Moving Averages (SMA or EMA): This is a trend indicator, which follows each step that leaves the price, so it is an ideal tool to identify what are these levels of dynamic support and resistance. (Later I will show examples of how to use them, since they are the main tool for this type of strategy).
Trend lines: This is another tool used to identify this type of supports and resistances that the price is leaving with its movement, however, they are not so reliable, since, by themselves, do not follow the price and we must be manually updating them to be more accurate with the levels to identify.
Examples:
Screenshot of Tradingview
Screenshot of Tradingview
Make a combination of two different EMAs other than 50 and 100 and display them on the encryption charts as Support and Resistance. (Clear charts are needed)
I have tested this strategy with other "Moving Averages" of different periods for some time, in order to evaluate the rejections that the price makes on them, which leave in their path the so-called "Dynamic Support and Resistance", based on this, one of the best combinations that has worked for me, of course, from the ideal of EMA 50 and 100, are the EMAS of 80 and 200 periods. When you look at the examples, you will see that the rejections are quite accurate and the price is respecting these points in what is the development of the trend.
Examples:
Dynamic Support
Screenshot of Tradingview
Dynamic Resistance
Screenshot of Tradingview
Input parameters for a Buy/Sell position
Now, to execute any strategy in the financial market, whatever the asset in which we want to invest, we need to keep in mind certain parameters, so that our chances of success are much higher. In this sense, in order to minimize the risk, I will detail each of the parameters that we need to consider when entering and/or exiting an operation. Join me:
Entry parameters for the "Buy" position:
The first thing we must do is enter our preferred trading platform (Binance, Metatrader 4/5 or other Broker) and add to our chart the 50 and 100 period EMAS.
In order to have a valid chance of following an uptrend, the price must always be above our EMAS.
We must wait until the price touches or crosses the 50 period EMA, to be able to prepare for the next condition (We should not buy here), since, we can run the risk that, if it crosses very strongly, the price continues to fall.
In order to prepare for a possible "Buy", the price must rise again and cross the 50 period EMA.
- The last condition to be able to "Buy" is that the price exits above the 50-period EMA, and closes above it, at that precise moment we must enter our purchase.
Examples:
Screenshot of Tradingview
Input parameters for the "Sell" position:
The first thing we must do is log into our preferred trading platform (Binance, Metatrader 4/5 or other Broker) and add the 50 and 100 period EMAS to our chart.
In order to have a valid opportunity to follow a downtrend, the price must always be below our EMAS.
We must wait until the price touches or crosses the 50-period EMA, in order to prepare for the next condition (We should not sell here), because we can run the risk that, if it crosses very strongly, the price continues to rise.
In order to prepare for a possible "Sell", the price must go down again and cross the 50-period EMA.
The last condition to be able to "Sell" is that the price goes below the 50-period EMA with force, and closes below it, at that precise moment we must enter our sale.
Examples:
Screenshot of Tradingview
Exit parameters for a Buy/Sell position
Exit parameters for a "Buy" position:
Whenever we have an active position in the market, we must place a "Stop Loss" to prevent the loss from growing in case our trade goes in the wrong direction.
This "Stop Loss" level should always be below the 100 period EMA.
If the price touches our stop loss zone, it means that our trade has gone in the opposite direction, so our setup is invalid and the best thing to do is to exit the position and wait for another opportunity.
After we place our "Stop Loss" level, we should immediately place a "Take Profit" level in case the trade goes as expected.
At least when we are starting to use this strategy, our "Risk/Reward" ratio should be at least 1-1, after the "Backtesting" is done, we can modify this ratio always depending on the market conditions.
Once the price reaches our "Take Profit" level, we have the option of placing a Trailing Stop, in order to be able to take advantage of all the trend movement. All we have to do is to raise our "Stop Loss" to our profit zone and with that our profits are already protected.
Example:
Screenshot of Tradingview
Exit parameters for a "Sell" position:
Whenever we have an active position in the market, we must place a "Stop Loss" to prevent the loss from growing in case our trade goes in the wrong direction.
This "Stop Loss" level should always be above the 100 period EMA.
If the price touches our stop loss zone, it means that our trade has gone in the opposite direction, so our setup is invalid and the best thing to do is to exit the position and wait for another opportunity.
After we place our "Stop Loss" level, we should immediately place a "Take Profit" level in case the trade goes as expected.
At least when we are starting to use this strategy, our "Risk/Reward" ratio should be at least 1-1, after the "Backtesting" is done, we can modify this ratio always depending on the market conditions.
Once the price reaches our "Take Profit" level, we have the option of placing a Trailing Stop, in order to be able to take advantage of all the trend movement. The only thing we have to do is to lower our "Stop Loss" to our profit zone and with that our profits are protected.
Example
Screenshot of Tradingview
Perform 2 demo trades on cryptoassets using the Dynamic Support and Resistance strategy. You can use a lower time frame for these demo trades (clear charts and real trades are needed).
To comply with this section, I have taken as the previous class, the Tradingview platform to simulate a trade fulfilling the strategy, however, this time it is different, since, I have achieved in this platform, the way to trade with a demo account, in order to practice these strategies in the easiest and fastest way. This option to trade in demo is called "Paper Trading". I didn't really do it in real, because my personal investment model, at the moment with cryptocurrencies is long term, so I am in the process of accumulation with them.
Without anything else to say, I will show in the examples 1m trades with 2 different crypto assets. Join me:
Example OGN/USD Demo entry
Screenshot of Tradingview
This entry was positive, here is the result:
Example ETH/USD Demo entry
Screenshot of Tradingview
This entry was also positive, here is the result:
Screenshot of Tradingview
Conclusión
I am grateful to Professor @cryptokraze, for these great classes that help the academy and the whole community, with learning in the financial markets. This was a great strategy, simple and easy to master in the markets and the best, is that all have a good control over the risk. With this I say goodbye and see you in the next class.
Imagen GIF proporcionada por jacorv
Excelente publicación profesor.
Dear @lenonmc21
Thank you for participating in Steemit Crypto Academy Season 03 and making efforts to complete the homework task. You got 10/10 Grade Points according to the following Scale;
Key Notes:
We appreciate your efforts in Crypto academy and look forward for your next homework tasks.
Regards
@cryptokraze
Good day sir @lenonmc21
Please sir kindly attend to my post
I commented on your post two days ago but you skipped my link.. here is my link
Crypto Academy Season 3-Week 5|| Homework post for Prof. @lenonmc21 |Trade with 'Simple and Exponential Moving Averages' +Application of 'Fibonacci Retracements' on the chart by @cinnymartins