Fear and Greed Index - Crypto Academy / S4W5 - Homework Post for Professor @wahyunahrul
Good day steemians am glad to welcome to my week 5 season4 assignment on fear and greed index lectured by professor @wahyunahrul.
INTRODUCTION
The purpose of this assignment is to evaluate the way crypto holders and traders buy and sell their crypto asset due to emotional feelings or due to trends of the market.
1). Explain why emotional states can affect cryptocurrency price movements?
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Before I proceed I will like to explain the meaning of emotions, emotions is a natural feeling that come from every human as a result of things seen or things heard. As human all of us have emotional feelings but as crypto trader some of us allow this emotional feeling to control the way we hold or trade crypto assets.
Emotions have affected Crypto a lot especially bitcoin (BTC) the mother of cryptocurrency,
some people place a buy or sell according to what they feel will happen to a particular crypto asset without doing proper technical and fundamental analysis on that particular crypto, recently news have been affecting the movement of crypto and traders have been selling having the feeling that is still going to decrease the more.
This will lead us to the fear and greed index this is a an indicator that indicate peoples feeling towards a particular crypto asset, it collects data from different source and its an indicator that ranges from 0-100 in which 0-40 indicate fear I.e people are afraid of missing their cryptocurrency and the sell massively, from 40-60 indicate neutral people are either buying or selling and 60-100 means greed I.e people are buying massively because the crypto asset are showing green light.
Conclusively, emotions have great effect on crypto asset and can control the movement of the market due to the fact that emotions control so many people and by so doing they trade due to what they feel will happen to the cryptocurrency market without doing proper analyses.
2). In your personal opinion, is the Fear and Greed Index a good indicator of the market's emotional state? if not, try to give reasons and examples of other similar indicators for comparison.
Fear and greed index is a new indicator that shows the price movement of crypto asset, Fear and greed indicator is a very good indicator for market emotional state, because it shows the real state of peoples mind towards crypto asset. It has some good functions.
volatility: Fear and greed indicator shows volatility of market price, when there's a massive move in the market fear and greed indicator will evaluate and shoe us how volatile the market is.
Trends : Fear and greed indicator shows us the current trend of the market.
When the indicator is at the range of 80-100 it's indicating that the market is extremely greed and vice versa if the market ranges around 0-20 indicating extremely fear.coin dominance: Fear and greed indicator shows us the most traded coin because not all coin are been traded at same volume, so the fear and greed indicator shows us the dominating coin.
COMPARING SIMILAR INDICATORS
- MACD
MACD is a kind of indicator that does almost same work as the fear and greed indicator, it shows the momentum, movement of market, market volume e.t.c.
3). Give your personal opinion on what data should be added to the Fear and Greed Indicator.
Fear and greed shows only market movement,momentum and trends but it doesn't show when to enter or when to exit the market and this two key levels are very important in trading. I will personal suggest that the fear and greed shows an entry and exit point, with all other functions of the indicator I believe by adding this will make it a better indicator for trader to use their analysis.
I also notice fear and greed indicator affect only major crypto , It will be a nice thing if fear and greed can affect other minor it will make the trading volume of crypto to be very large in such a way that so many people will be accustom to crypto and crypto will be used in different sector's,ministries and various company all over the world
4). Do a technical analysis for 2 to 3 days (maybe more) using the Fear and Greed Index and the help of other indicators. Show how you made the decision to enter the cryptocurrency market and explain the results of your trade (Screenshot Required)
On the Thursday 7/9/2021 I made analysis BTCUSD using the fear and greed indicator supported with moving average to enter a buy trade using a demo account on trading view, I bought BTCUSD that day at $53938 which was DAY 1 of my analysis using the fear and greed index indicator.
I notice the market was at the greed level and still going to be more extremely greedy as the prices crosses the 7ma period upward, then I held the trade till there second morning which was Friday 8/9/2021 , by the second day the trade was already in profit of $2,634 and was becoming more greedy at this point and I still held the trade further.
At the third day which is today 9/9/2021 then I noticed the market is becoming neutral though the profit has increased to $14,992
Haven done the three days analysis using fear and greed indicator and with the support of moving average of 7 period I decided to close the trade at $15,000.
CONCLUSION
Fear and greed index indicator is a very good indicator though not yet know to many but soonest everybody will know about it.
fear and greed comes up as a result of people's feelings towards the crypto market and this emotional feeling affect the market a lot an example was what two month ago when a need was released from USA and China with the breaking of this news holders of crypto started selling in mass and everything started going down before it started regaining its strength back.
Thanks to professor @wahyunahrul for the well explained lecture hope to hear from you soon.
.NB all screenshot was from trading view.