[ Highly Profitable Trading Strategy with VuManChu Cipher B ]-Steemit Crypto Academy | S5W6 | Homework Post for @reddileep

Hello again Professor @reddileep. It is an honor to resume classes with you and especially to do it in this post where you talk about this wonderful Indicator. I hope to be up to the task.

Let's get started.

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1. Define VuManChu Cipher B Indicator in your own words.

VuManChu Cipher B is a formidable unconventional indicator that gives us many indications to anticipate market movements.

It is an indicator formed by several oscillators united in one (kind of Swiss army knife of indicators), unified in a single interface, which gives us a global and joint vision of the signals of each one at the same time.

The interface of this indicator is positioned just below the price and actually, these are not indicators that work separately, but the signals are related to each other and work in unison.

2. How to customize the VuManChu Cipher B Indicator according to our requirements? (Screenshots required)

First of all, as we do with all indicators we go to the top panel and click on the "indicators and strategies" button. Right there the pop-up window will appear where we should type the name of the indicator "VuManChu Cipher B" and select the option shown in the image.

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At this point the indicator will appear in its entirety below the price, however, it is a very complex indicator with several tools that do not necessarily fit our type of trading, so we must remove some oscillators. To do this we click on the "settings" button.

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A pop-up window will appear in the "inputs" menu which is precisely where we will uncheck some oscillators to disable them. The indicators to remove are WT Regular Divergences, 2nd WT Regular Divergences, and Stochastic RSI.

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Then, in the "Style" menu, we will remove the Volume-Weighted Average Price and MFI Bar Colors indicators. Therefore we click on their respective boxes to remove them from the interface.

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Finally, the VuManChu Cipher B indicator will be clean, with the indicators we need for this trade, which are the Wave Trend indicator and the always useful Money Flow Index, which I will explain in the next question.

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3. Explain the appearance of the VuManChu Cipher B Indicator through screenshots. (You should Highlight each important part of this indicator by explaining their purpose)

After the steps performed in the last section, we can focus on the main elements that we will use for the moment in the VuManChu Cipher B Indicator, which is the Wave Trend indicator and the Money Flow Index.

Wave Trend indicator

On some sites, I have also seen it as Waves and Dots. This indicator shows us the momentum (bullish or bearish) which is represented by a chart in the form of waves (dark and light blue color) moving around a central zero line.

The importance of this indicator is that it shows us the direction of the market as well as buy or sell signals depending on the interaction of the waves to 5 important levels which are: zero line, lines (-60, 60), and lines (-100,100).

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So the zero line functions as a midpoint to indicate the direction of the price so that if most of the waves are above the zero line, it means that we are in a bullish phase of the market and if on the contrary most of the waves are below the zero line it means that we are in a bearish phase.

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On the other hand, the (-60, 60) levels function as triggers to open buy or sell orders and the (-100, 100) levels function as overbought or oversold signals.

Waves are usually confused with the blue area below the curve, however, the real waves are the ones depicted in light blue and dark blue. It is these two waves and their crosses that really come into play with the levels mentioned above.

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The crossovers between these two waves mark an impending trend change, which in turn are highlighted by the red and green dots that function as indicators of crossovers between the two and signals to place positions.

The red dot signals a trend change from bearish to bullish. On the other hand, the green dot signals a trend change from bullish to bearish. The change of waves will always be from light to dark on both sides of the zero line.

Money Flow Index

This element simply represents the money that enters and leaves the asset. This metric as simple as it may seem follows the basic principle of the market, which indicates that when money enters a project, its cryptocurrency starts to become scarce therefore its value increases, and on the contrary, if money leaves, the supply of the crypto asset will increase and its price will fall, hence its importance as an indicator.

The money flow index is represented as a curve whose area changes color (between green and red) according to the position in which it is concerning the zero line. This position determines the inflow or outflow of money.

So if the curve is above the zero line it will take on a green color and indicate that there is money entering the currency. Interestingly this should be accompanied by an increase in price.

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On the other hand, if the curve is below the zero line, it will turn red and indicate that money is leaving the currency. This is usually accompanied by a fall in the price of the asset.

From a practical point of view, the money flow index will serve as an early confirmation in our trading strategy to place entries.

An interesting fact that I discovered during my research on the money flow index is that we can anticipate trend changes by studying the behavior of the slope of the curve.

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As you can see the point at which the price changes trend coincides with the change in slope of the money flow index curve, which can serve as a further confirmation of the VuManChu Cipher B strategy.

4. Demonstrate your preparation for the Trading Strategy by combining other indicators. (Instead of showing the addition of indicators to the chart, you should explain the purpose of each indicator for this trading strategy.)

The VuManChu Cipher B Indicator strategy would not be complete if it is not first combined with the use of another indicator. This other indicator will function as the main indicator while the VuManChu Cipher B Indicator will function as the support and confirmation indicator.

Our Indicator of choice will be the EMA, or rather two EMA's.

We will use the classic EMA crossover strategy where one of the EMA's will be 55 periods and the other 200 periods, where the EMA (55) will behave as a fast curve and more sensitive to market movements, while the EMA (200) will behave like a slow curve more stable.

By using both we achieve a balance in the signals where the crossover between the two represents a trend change and therefore a first entry signal. We will use a 5min timeframe which is optimal for this type of strategy.

First, we must place two EMA's on our chart, and then we must adjust them in the "setup" button to modify their periods. As already said one EMA will be set to 55 periods and the other to 200 periods.

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In this way, we can see the interaction of the EMAs with each other and the way they interact with the price. So when the 55 EMA crosses the 200 EMA in an upward direction it represents the beginning of an uptrend. As long as the 55 EMA remains above the 200 EMA it means that the uptrend is sustained.

On the other hand, when the 55 EMA crosses the 200 EMA in the downward direction it will represent the start of a downtrend.

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5. Graphically explain how to use VuManChu Cipher B Indicator for Successful Trading. (Screenshots required)

The whole process is a set of signals that must be fulfilled in precise chronological order, working together with the EMAS's and the VuManChu Cipher B Indicator. We will take an example of an entry to buy at 5min.

ENTRY

1-First we must wait for the crossing of the EMA's to occur. In this case, as we are looking for a buy it is expected that the EMA 55 crosses in an upward direction the EMA 200.

2-After the first confirmation is given we should start looking for signals on the VuManChu Cipher B Indicator, specifically on the money flow index indicator, which should be above the green zero line, which indicates that money is entering the currency and the price of being rising.

At this point we have not yet placed our entry, we have only followed confirmations.

3- The last signal and trigger will be the waves and dots, which occur just at the moment when the light wave becomes dark. Just at that moment is generated in the crossing place a green dot which indicates us to buy. Just at that moment, we place our long entry.

Note that the entry point has been exceptional, as the green point of the wave has occurred below the zero level.

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EXIT

For exit, there are several options.

1-First we set the stop loss, which can be placed below the most immediate support level experienced by the price.

2- Based on the stop loss set we can place a take profit with a reward ratio of 1:1, 1:2, 1:3. In my case, I used one of 1:2.

3-On the other hand we can use a take profit strategy based on the waves of the VuManChu Cipher B Indicator, selling our position just when it indicates an overbought point at the 100% level.

4- In fact, if I think about it better, another option could be to use both strategies, dividing our profits into a take profit 1 and a take profit 2. Both would be valid and would complement each other very well.

6. Using the knowledge gained from previous lessons, do a better Technical Analysis combining this trading Strategy and make a real buy or sell order in a verified exchange. (You should demonstrate all the relevant details including entry point, exit point, resistance lines, support lines, or any other trading pattern)

This part of the task was the most time-consuming, as I had to wait for the right time for all the signals from the indicators to come in. I had trouble getting a purchase in time. But on the other hand, I had the opportunity to make a short entry (sell) in a future asset, which is a product of the Exchange FTX that allows you to earn (and put at risk) Real money through price variation.

The active selected was XRP Perpetual Futures, at a 5-minute timeframe using the VuManChu Cipher B Indicator strategy and EMAs 55 and 200.

1-I selected this asset because of all the assets I researched at the time I performed this part, it was the only one that showed a crossover of the EMAs. In this case, the EMA (55) crossed the EMA (200) in a downward direction, indicating the beginning of a bearish phase.

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2-As you can see, the VuManChu Cipher B Indicator confirms the bearish phase, as we see the Money flow index in red and below the zero line, indicating that money is flowing out of the currency.

One thing I am very aware of is that the wave trend indicator has marked an oversold point, so I expect a pullback in the price which could be a good entry point before continuing the downtrend.

At this point most would be wrong to assume that the downtrend has come to an end only because of the oversold in wave trend indicator, however, both the money flow index and the EMAs confirm the bearish phase.

3- Having the first two confirmations, I head to my verified FTX account.

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Perpetual assets use the amount of dollars you hold in the account as collateral. In my case, due to some trades that went wrong, I am in a negative balance of -2.9 USD. However, due to the other assets I have in the account I am allowed to continue making trades buying and selling perpetual assets.

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4- After waiting for an hour, the third confirmation I was waiting for, the trigger occurred. In the waves occurs the change from darkwave to lightwave, remarked also by the red dot which indicates selling. I still expect the 5-minute candle to top, as there are times when the red dot just disappears.

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5- Upon confirmation of the wave trend, I go to the XRP-Perpetual trading interface and prepare a sell at market price (no leverage) and using only 25% of the maximum total I am allowed. This is to control the risk.

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After placing the order, it will appear reflected in the Exchange interface.

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I now set up my exit strategy.

6- First of all, for the stop loss I will use nearby resistance which held the price twice. This level is at 0.973 USD. For such reason, I will place my stop loss above that value, just at 0.975 USD.

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7- For the Take profit I will use a conservative strategy of a reward ratio of 1:2. Therefore my take profit will be at the level of 0.9543 USD. Obtaining a 1.4% profit.

8-After setting the exit points in Tradingview I go to my Exchange account and place them on the trade as pending orders. For the stop loss, I use the buy with a market stop at 0.975 USD and for the take profit, I use a buy at take profit at 0.9543 USD. Both trades with the same lot I used at the beginning.

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9-The trade could not have gone better, as 30 minutes later it gave me the expected profit, triggering the take profit buy order at 0.9543 USD level.

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Here you can see the Exchange proof along with the link: https://ftx.com/shareable-pnl/published/934642

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Finally, you can also see the slight profit I made, as the total negative amount was reduced (-2.7 USD) thanks to the take profit from the trade.

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CONCLUSION

This strategy and this indicator have impressed me. It is a Swiss army knife capable of showing us several trading signals.

One thing I really liked about the indicator is the relationship between the money flow index and the variation in the waves, which do not offer wonderful entry points.

However, like many other authors who talk about it, it is advisable not to use this indicator as to the main strategy, but rather as a confirmation of the main strategy.

In addition, it is recommended to be careful with the risk management and the amounts of money used in the use of this strategy.