Perfect Entry” Strategy using Stochastic Oscillator + 200 Simple Moving Average - Crypto Academy / S5W3 - Homework post for @ lenonmc21
greetings great steemians, I am happy to be here writing to you all in the season 5 week 3 of this academy, today we will be talking about the perfect entry strategy which helped our professor as a beginner in trading, but this strategy is very useful for all levels be it beginner or advance. enjoy the ride while you read.
Due to google translate there may be little erros and mistakes but I did my best to avoid as much as I could. Lets roll
1. State in your own words what you understand about the Perfect Entry Strategy (Place at least 2 examples on crypto assets)?
The perfect entry strategy is a strategy based on 3 major scenarios which must correspond before an entry is made either for a buy or for a sell. I will be breaking down the 3 scenarios
1. DETERMINE THE MARKET TREND
The first step in carrying out the perfect entry strategy is to determine the current market trend knowing the current market trend is key in determining the perfect entry scenario. knowing if it's a bullish trend or a bearish trend, this we can do taking advantage of the knowledge of the price action.
2. JAPANESE CANDLE STICK COLLISION WITH THE 200MA
Determining the trend is just the first step to initiating our perfect entry strategy but there is a second out of the three conditions which is the point where the japanese candle stick forms a trigger candle which is a candle with little or no force in it's movement and the trigger candle touches the 200MA indicating that there is no force to continue in that direction and moves towards the other direction of the trend which occurs vice versa for a fall or a rise of the japanese candle. with the MA creating a support or resistance for the trend.
we can see some examples below on the two major trends.
3. STOCHASTIC INDICATOR
The stochastic osillator is the 3rd and finally indicator check to carry out before making an entry on the perfect entry strategy. this indicator is used to show an overbought and oversold of an asset.
In this case when the trend is determined, and the trigger candle meets with the 200MA in the perfect condition as explained above, then this is where the stochastic indicator comes into play. let me give an illustration below for better understanding.
For example if the trend is determined by the price action, and the 200MA is above the trend approched with a small trigger candle indicating that there is no more force to continue that trend, the stochastic indicator will give a signal that is above 0-80 showing a clear entry for a sell position
below is an example below.
vice versa if the trend is determined by the price action, and the 200MA is below the trend approched with a small trigger candle indicating that there is no more force to continue that trend, the stochastic indicator will give a signal that is below 0-20 showing a clear entry for a buy position.
below is an example .
2.Explain in your own words what candlestick pattern we should expect to execute a market entry using the Perfect Entry Strategy.
Just like I explained above, that what is needed is a japanese candlestick that isn't moving with full force, which is called the trigger candle (the trigger candle is a small thing line that that touches the 200MA ). Let me give a simple illustration for better understanding. Let's imagine a moving car moving at full speed and approaches near the gate of a house, it reduces it's speed and force just to approach the gate slowly, imagine the car comes to a stop and touches the gate lightly with the bonnet of it's car. that is exactly what happens here.
The japanese candle stick touches the 200MA with a wick showing little or no force to continue the trend and moves in the opposite direction.
Below is an example of a wick
3. Explain the trading entry and exit criteria for buy and sell positions in any cryptocurrency of your choice (Share your own screenshots)
The conditions for the entry and exit criteria are quite easy to understand and I will be explaining it below
Just as I clearly explained in question 1, the 3 conditions must be met, getting to know the market trend with the help of price action, then we make sure that the japanese candle stick forms a trigger candle that touches the 200MA after we have gotten that it is remaining the last condition which is the stochastic oscillator as I explained above.
after the conditions above has been met then we can proceed to the next point but if one of the conditions are faulty then we must let it pass and wait for another entry.
Place your stop loss below the small wick of the candle and our take profit is placed above the 80 mark of the stochastic oscillator usually at a 1:2 or 1:3 RRR
In the image below of the GALA/USDT at a 1 minute time frame, we can see first of all the market trend identified, then we also identified the wick touching the 200MA and we can see that the stochastic oscillator gives a reading below 0 - 20 which a clear indication for a buy entry. The stop loss was placed below the wick with a take profit of 1:3 RRR which is a correct set up for an entry and exit.
For a sell entry and exit criteria it will simply be the opposite of what I aforementioned making sure that all criterias match the sequence.
4. Trade 2 demo account trades using the “Perfect Entry” strategy for both a “Bullish” and “Bearish” scenario. Please use a shorter period of time to execute your entries. Important you must run your entries in a demo account to be properly evaluated.
It wasn't easy finding this trades as getting the perfect pair and conditions are a bit strenuous but I was able to get something cool let's look at the demo trade below
BULLISH PERFECT ENTRY STRATEGY
In order to make this entry
I made sure that the 3 conditions explained above were met and the stochastic indicator was reading between 0-20
I placed my stop loss below the wick and my take profit at a 1:3 RRR
I made a buy entry at the market price while waiting to exit at my take profit. below is the chart and the trade made on the GALA/USDT pair at a 1min time frame
BEARISH PERFECT ENTRY STRATEGY
In order to make this entry
I made sure that the 3 conditions explained above were met and the stochastic indicator was reading above 0-80
I placed my stop loss above the wick and my take profit at a 1:3 RRR
I made a sell entry at the market price while waiting to exit at my take profit. below is the chart and the trade made on the SHIB/USDT on a 5 minutes time frame
CONCLUSION
The lecture was great and impactful seeing that I really learnt a lot. The perfect entry just as the name sounds is a very great entry strategy that traders and beginners like us should make good use of.
I learnt the accurate conditions for an entry and the perfect condition for an exit knowing where to place the stop loss and the take profit to get maximum result.
It was a beautiful lecture and I have explained to the best of my understanding.
best regard
@lenonmc21