Crypto Academy / Season 3 / Week 4 - Homework Post for @cryptokraze | Dynamic Support & Resistance
Dynamic Support and Resistance's Definition
We can know about them as those ones that organically they get created throughout the chart according to the current behavior of the market with the help of an offset line like an Exponential Movement Average (EMA), which can serve as a good reference no matter if it's uptrend or downtrend but they are more precise that horizontal segments. Easier to predict due to the rejection of price that use to do towards this line, acting like a dynamic resistance when it's above the candles or like a dynamic support when it's below of them, just take a look on the following image of a BTC-USDT pair from Binance exchange (1 hour frame).
Finding Supports and Resistances with EMA indicators
Because the less number to set in the EMA, the more sensitive with the price would be the built line characterized by this indicator, so we can find excellent sources of signals through the use of two EMA lines (for instance, 50 and 200 length with purple and yellow color respectively), according to the next described situations:
📈Dynamic Supports for Buy Scenario
The EMA lines are useful for this case due to the fact of acting like a magnetic ones that price go down from above to stick them by often but then get back uptrend immediately in a swing movement, without crossing further both lines. Then, by this way we can be sure to set the dynamic supports when they are approaching and getting touched each other.
📉Dynamic Resistances for Sell Scenario
The EMA lines are useful for this case due to the fact of acting like a magnetic ones that price go up from below to stick them by often but then get back downtrend immediately in a swing movement, without crossing further both lines. Then, by this way we can be sure to set the dynamic resistances when they are approaching and getting touched each other.
Trade Entry and Exit Criteria
🔺For Long position
In a bullish trend of the chart, It's necessary to wait until the EMA lines are below the price (acting like dynamic supports) but the 50 length one must be above to the 100 length and starting to get touched by candles and then go up enough to avoid an invalid entry by an unexpected change of price direction.
Once this happened, we can make the buy entry with a Stop Loss located a bit below to the 200 length EMA line (in yellow) and calculating adequately a RR of 1:1 or 1:2 in order to exit with a sell order from the market.
🔻For short position
In a bearish trend of the chart, It's necessary to wait until the EMA lines are above the price (acting like dynamic resistances) but the 50 length one must be below to the 100 length and starting to get touched by candles and then go down enough to avoid an invalid entry by an unexpected change of price direction.
Once this happened, we can make the sell entry with a Stop Loss located a bit above to the 200 length EMA line (in yellow) and calculating adequately a RR of 1:1 or 1:2 in order to exit with a buy order from the market.
Demo trades for dynamic supports and resistances
🔺For Long position
At the 30 minutes BTC-USDT pair from Binance in Trading View website, I was monitoring the price until I saw it touching the dynamic support level of 32.030 provided by the 50 length EMA in purple, so I waited for a bullish and a little separation from that line in order to make a Buy Entry order at 32.120 , with a RR setting of 1:1 (Stop Loss of 31.680 according to the 100 length EMA in yellow and a calculated Profit). Then, a Sell Exit order of 32.560 was executed to take it with success.
🔻For short position
At the 30 minutes TWT-BTC pair from Binance in Trading View website, I was monitoring the price until I saw it touching the dynamic support level of 0.00000932 provided by the 50 length EMA in purple, so I waited for a bearish and a little separation from that line in order to make a Sell Entry order at 0.00000925 , with a RR setting of 1:1 (Stop Loss of 0.00000935 according to the 100 length EMA in yellow and a calculated Profit). Then, a Buy Exit order of 0.00000915 was executed to take it with success.
👷🏻♀️>>~•Alegn@•~>🎶
*** See you in next post *** 📝
Dear @alegnita
Thank you for participating in Steemit Crypto Academy Season 03 and making efforts to complete the homework task. You got 9/10 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
Thank you dear professor. This is my best grade I've got so far. 🤩 I've read that many traders use 200 for the EMA indicator, but you're right. I noticed this line a bit away from price. I'm using the combination of 50 and 100 in my trades from now on. Thank you once again for informative lessons. #venezuela #affable
You are welcome