Basics to trade cryptocurrencies correctly [Part 1] - Steemit Crypto Academy - S6W1 - Homework post for nane15
Hello there,
I'd like to welcome you to Season 6 Week 1 of the Steemit Crypto Academy. It's a joy for me to come back here to participate in the academy. This week's lecture was centered on the topic Basics to trade cryptocurrencies correctly [Part 1], and after reading through the exciting lecture, I am going to undertake the homework job on this blog of mine. Let's get this party started.
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1. What do you understand by trading? Explain your understanding in your own words.
When we think of trade, we think of the buying and selling of both things and services with the goal of generating a profit. Trading is governed by the principles of demand and supply. In the crypto currency sector, traders seek to acquire assets at low prices with the intention of selling them at high prices.
As I previously indicated, crypto currency trading follows the rule of demand and supply, which means that the value of the coins decreases when the supply of the coins is large, and the value of the coins grows when the demand for the coins is strong. As we all know, the relevance of the rule of demand and supply in trading cannot be overstated because it is the reason why asset prices do not stagnate.
When we look at the crypto currency market, we observe that the price fluctuates every second, which is a clear indicator that there is interaction between buyers and sellers. Furthermore, the demand and supply rule is at work in the market, and the liquidity supplied by the exchange is such that the asset is available to traders to purchase or sell at any moment.
The use of exchange platforms facilitates bitcoin trading. The platform gives all of the information required for traders to buy or sell assets with a single click. Long-term traders and short-term traders are both possible in trading. Long term traders are individuals who buy an asset at a cheap price and then anticipate that the asset's price will rise in the near future, at which point they will sell it. Short-term traders, on the other hand, purchase and sell assets whenever there is a little movement in the market. Short-term traders typically generate minimal profit.
When it comes to trading, there are a few analyses that may assist traders earn more money, including technical analysis, fundamental analysis, and emotional analysis. Let's take a quick look at them below.
Technical Analysis
For this form of study, graphs and indicators are commonly used. In trading, we think that the market is in a circle, which means that many things repeat themselves, thus the graph history is used to forecast the next movement of the asset's price. This is mostly used by short-term traders who want to earn by analyzing a certain pattern and then using it when it appears on the crypto chart again.
Fundamental Analysis
Another crucial analysis that every trader who wants to be successful must consider is fundamental analysis, especially long-term traders. This study includes government legislation, social media news, updates on the project in issue, whales, and so on. When all of these factors work in favor of the coin, there is a very good chance that the asset's price will rise at some point. So traders may buy these currencies and hold them for the future because it will undoubtedly arrive.
Sentimental Analysis
This kind of study is concerned with human perception. A lot of human factors are taken into account here, such as uncertainty, fear, emotion, and so on. You, as a human being, must do this analysis on what you believe will be the market's result in the near future.
2. What are the strong and weak hands in the market? Be graphic and provide a full explanation.
The market's strong and weak hands are what cause the rise and fall of asset prices in the crypto currency market. When purchasers of an asset begin to buy, i.e. they begin to demand the asset, the price of the asset rises; conversely, when sellers of an asset begin to sell, i.e. they begin to provide their asset to the market, the price falls. In the paragraph below, we'll go over what strong and weak traders are all about.
Strong Hands in the Market
Those with a considerable quantity of capital invested in the market are considered to have powerful hands. Investment firms, hedge funds, and banks, among others, have powerful hands since they trade the market with a large amount of money. Now, this sort of trader has so much market power that their very existence in the market is enough to drive up the price of the item in issue. We refer to these investors as whales because they have the ability to affect the price of a crypto asset at any moment.
The market's powerful hands profit through affecting the market through production and accumulation. During the accumulation phase, the whales put a lot of money into the market, causing the price of the asset to fall and generating a lot of demand for the item in question. When they have acquired enough, they distribute the asset, causing the price of the asset to fall again, allowing them to profit and opt outside the market because they are removing their money from the market.
Weak Hands in the Market
The market's weak hands are those who have made only a little cash commitment. Individuals, small businesses, and other entities are examples of this sort of investor. Unlike the strong hands, the weak hands have no effect on the asset's price because they account for less than 10% of total liquidity. This implies that their exit from the deal will have no effect on the price, as it does when strong hands with up to 30% -50% market influence exit. The strong hands usually employ the weak hands to earn a profit by bringing them into the marketplace and capturing them.
3. Which do you think is the better idea: think like the pack or like a pro?
To me, thinking like a pro is vastly superior to thinking like the pack. When you start thinking like a pro, you can be confident that your asset is being protected. We all know that the market's powerful players control pricing. In other words, they purchase when the price is low and sell when the price is high. They have the capacity to impact the market's pricing at any time.
To think like a pro entails placing a deal only after all confirmation has been received. You do not adopt a stance only based on information spread by users on social media about the coins in the issue. Before placing a position, you carefully examine the price chart and confirm it. A weak hand can be highly successful if he thinks like a pro, that is, if he considers the technical analysis of the trade and ignores sentimental analysis, which can cost him his whole money.
4. Demonstrate your understanding of trend trading. (Use cryptocurrency chart screenshots.)
One of the most crucial aspects of trading is the trend. The term "trend" refers to the movement of an item in a certain direction over a specified time period. For a trader to be successful, he or she must grasp the asset's trend direction so that there is no room for counter-trading, or trading against the trend. Based on the professor's presentation, I will use the Elliot wave pattern to illustrate the trend below. Let's take a quick look at the trend utilizing this pattern.
Elliot Wave Trend Pattern
The Elliot wave trend pattern is composed of two distinct wave patterns: the impulsive wave pattern and the corrective wave pattern. The impulsive wave pattern consists of five waves, with waves 1, 3, and 5 moving in the trend direction (Impulsive movement) and waves 2 and 4 acting as a pullback (Corrective movement) where traders can take profits. The corrective wave pattern, on the other hand, consists of three waves, namely a, b, and c. Waves a and c are both advancing in the trend direction (Impulsive movement), whereas wave b is acting as a retreat (corrective movement).
The following rules are intended to help us when it comes to the Elliot wave pattern.
Waves 2 and 4 should not retrace back to the prior lows of waves 1 and 2, respectively.
Its highs of waves 3 and 5 must be greater than the highs of waves 1 and 3.
Wave 3 has to be the longest of the waves in the charts.
The full rule that regulates the Elliot hypothesis has been noted in the screenshot above. As we can see from the first rule, wave wave 2 should not retrace to the prior low of wave 1 and wave 4 should not retrace to the previous low of wave 2, which has been taken into account in the chart. Second, the second rule was noticed, in which the highs of wave 3 are higher than the highs of wave 1, and the highs of wave 5 are higher than the highs of wave 3. Finally, we can see from the chart that the third rule has been observed, with wave 3 being the longest of all the waves.
5. Show how to identify the first and last impulse waves in a trend, plus explain the importance of this. (Use cryptocurrency chart screenshots)
Both the initial and last impulses are significant in the Elliot trend pattern because they assist traders enter a new market trend. I'll discuss quickly below how we may identify both the first and last impulse waves in a trend.
Identifying first impulse wave
We have already shown how to identify trend using the Elliot trend pattern, so to identify the first impulse you must analyze the previous Elliot wave trend pattern and if the trend stops at point 5, then a reversal set in which points a, b, and c are seen. The wave advances above the previous high at point a, then breaks to produce point b, a lesser high, and then another move is visible to point c, which is higher than the previous high at point a. So, between points a and c, you have your initial impulse since you have a clear image of the trend's direction.
The initial impulse in the chart above indicates a confirmation of the asset's trend direction.
Identifying last impulse wave
Make sure you receive the five wave pattern movement after the first impulse was detected in order to identify the last impulse. After that, the following points a, b, and c, which are identical to those of the initial impulse wave, are taken into account. Consider the last impulse in the screenshot below.
According to the chart above, the final impulse represents a confirmation of the asset's trend extinction.
6. Show how to identify a good point to set a buy and sell order. (Use cryptocurrency chart screenshots)
As previously said, the impulse allows us to determine the trend direction of an item over time. So, once we've identified the 5 waves, the impulse points a, b, and c indicate the asset's trend direction, and we may place our order within that point. The parallel line drawn on the chart at the intersection of a, b, and c is where we should enter. This is how a bullish trend entrance may be made. In other words, the purchase entry should be made at the place where the parallel line is drawn and the stop loss should be placed below the entrance, and the take profit should be taken after the fifth wave point.
In the similar way, a sell entry may be made following the 5 waves trend pattern inside the impulse of a, b, and c when the parallel line is drawn in the downtrend. The points a, b, and c corroborate the trend movement, preventing you from losing your asset.
7. Explain the relationship of Elliott Wave Theory with the explained method. Be graphic when explaining.
As previously stated, Elliott wave theory is concerned with whales amassing assets and then distributing them to benefit. Now, before the 5 waves move, the impulse is observed, which provides us the trend direction before the 5 waves appear. This is the connection that occurs in the Elliott wave theory. The accumulation phase, followed by the five-wave is about, and finally the redistribution step.
The screenshot above clearly shows that the three steps continue to replicate themselves in terms of the Elliott wave pattern. First and foremost, we see accumulation, which is related to the first impulse, followed by a trend movement of the 5 trend wave pattern, and last, we see distribution, which is related to the last impulse. As a result of this research, the weak hand may start thinking like pros, as the Elliott pattern has revealed how the strong hands use the market to their advantage.
Conclusion.
Trading involves numerous ups and downs, and only those who think like a pro can be successful in trading. We've seen how the powerful hand manipulates the market, causing the weak hand to lose the majority of its assets due to the introduction of false out signals by whales. The only way to become a good trader is to follow the technique outlined in the professor's presentation by @nane15.
The Elliott wave pattern is a hidden weapon that may be utilized to succeed when trading cryptocurrencies since it has shown how crypto currency whales think. When you, as a retail trader, start thinking like a pro, your transaction will always be highly successful. Before entering any trade, always employ technical analysis for greater confirmation.
Finally, I'd like to thank the lecturer for such an excellent speech. This is a clear hint that this season is jam-packed with delights, and it also indicates that we will grow stronger cryptocurrencies investors before the season is through.
#nane15-s6week1 #cryptoacademy #club5050 #trading #krsuccess #pakistan
