Hello friends, trust we are all having a beautiful time out there. It is with great pleasure that I am engaging in another crypto academy homework task. @allbert just thrilled with the topic Psychology and Market cycle and I am doing his homework task.

1-Explain in your own words what FOMO is, wherein the cycle it occurs, and why. (crypto chart screenshot explanations needed)

FOMO is an acronym for Fear of Missing out. This can be defined as a persons feeling or perception regarding a trade that people are riding along with while he is missing out in the profitability fun. It is a psychological condition where an individual feels that he is missing out on something and not being part of the experience. Thus since that is the case, he will want to force himself into joining it , only to end up losing out entirely.

This feeling comes into play when a trader on opening his trading platform notices that a particular trend is on the way in the market, he then imagines the kind of money others are making and immediately jumps into the trend only to buy at the peak price, without technically analysing the market properly to see that the trend is as good as over. As soon as he entered the trade, the trend begins to reverse.

So that emotionally biased decision taken then is caused by the fear of missing out(FOMO). This aspect of emotional psychology is most experienced by new traders in the market. However, i dont personally think that there is any trader who have not been a victim of FOMO since we are newbies in trading at some point in time. So FOMO make the trader to buy when a bullish trend is almost over or sell when a bearish trend is almost over too.

In the chart above, you can see the entry point of traders with this kind of emotional bias. They enter the trade only to find out that the trend is over soonest.

2-Explain in your own words what FUD is, wherein the cycle it occurs, and why. (crypto chart screenshot explanations needed)

FUD is an acronym or short form of Fear, Uncertainty and Doubt.

This is a word used to explain the doubts or criticisms surrounding a crypto asset that is not doing well at that point in time. Sometimes there might be misleading information that is spreading about a particular crypto asset, and because of this some investors will start entertaining fear, uncertainty and doubt about the asset, thus selling the assets immaturely due to fear.

So in the crypto space, we now say that those investors are selling out of FUD. They do not want to be caught naping in case the fear becomes real.

These investors who sell out of FUD end up making huge losses because they feel there are no possibility of price increase any more. This also affects them even when there is a change in trend for that asset, that FUD prevents them profiting from that asset too.

So this is the fear makes traders to sell off their assets almost at the end of a bearish trend for fear of losing more money. Without knowing that the start of a bull run is just about to start.

From the chart above, we can see that the trader sold out of fear, uncertainty and doubt. He felt the asset price was going to rise, but it did not, he sold off without doing his technical analysis or checking the support of this asset. He does not want to lose more, coupled with negative information running amok.
We can also observe the rise in price after few bearish candle formation. That started a bullish trend.

3- Choose two crypto-asset and through screenshots explain in which emotional phase of the cycle it is and why. Must be different phases.

From the chart of BAT/USDT above, we can see that the market is recovering from its long bearish trend. Traders are beginning to be positive about this pair, no wonder the feelings of hope, relief and optimisim.
The confidence in the market is gradually growing and investors are buying into the asset. This has led to growing demand for this asset and thus many traders will be joining soonest.

The market is expected to hit the previous high and create another high within the forthcoming weeks. By then, the phase or cyle will move to excitement, thril and finally euphoria.

I am using the asset chart of CAKE/USDT to explain this aspect. The chart above shows the current situation in the market for this asset pair. I would say that the phase in the market is currently that of fear, anxiety, denial, depression and panic.

Before now, the pair hit the highest price of $44.278, however, the trend changed to a bearish market. Those who bought into the market at the first retracement, was expecting the price to go up.
There hope was dashed as the market continued spiralling downwards. At that point anxiety sets in, uncertainty grips the market, because the sentiments in the market does not show any sign of retracement,
Even at the point when the holders should have sold their position, they denied themselves that priviledge still hoping, until the price still went further downwards.

They now have to engage in panic selling, this further aids the down movement of the price. At this point people are in serious depression and anger for the massive losses they have incurred.

There is no more confidence in the market even though the market could be said to be in an accumulation phase. But due to uncertainties, many are still selling off their positions in the market.

4.Based on the analysis done in question 3, and the principles learned in class, make the purchase of 1 cryptocurrency in the correct market cycle. The minimum amount of 5USD (mandatory), add screenshots of the operation and the validated account.

I am using the asset pair of BAT/USDT to demonstrate this.

I will first open my Binance account and it is duly verified as you can see from the screenshot below.

I am using my futures account to do so.

These are my points of entry and exit on the chart. You can see that the market is in the phase optimism and I am entering a buy position to ride along for just a short while.
My take profit on the chart shows also that I am not a greedy profit taker, Exiting the market at the next resistance.

Click on buy.

USDT balance reduced after the buy entry position

Set the the take profit and stoploss as exit methods for the trade

Trade already in profit.

Trade exited after hitting takeprofit. You can now see the balance of my USDT.

Conclusion

I am grateful to the professor @allbert for his wonderful lecture, I have been able to learn so much. First, i have enhanced my knowledge about market cycle and psychology. Understanding it will help me in not be trapped in a market out of FOMO and selling with losses as a result of FUD.

However, there is need to work along with other indicators to get the best out of the market cycles and optimize its use.