Basics to trade cryptocurrencies correctly | Part 1- Crypto Academy / S6W1 I Homework post for nane15 by @sherazsultan

Hello everyone. I welcome you all in the 1^st week of 6^th season in steemit crypto academy. This week, professor @nane15 has delivered us a lecture about "Basics to Trade Cryptocurrency Correctly". This is my homework post.

We perform trading in our daily life. The word trading can be define as "Buying and selling the things." The trading is the exchange of the values, assets to make the profit. It is the exchange of one thing, value or asset for other like buying bread for money. We perform the trading with expecting that in future, either the value of the asset will be decrease or we expect that price will decline.

In the crypto world, trading is performed on some exchange platform like Binance, Huobi, kraken, etc. These platform make it easy for the traders to perform trading within no time and less trading fee. The traders are provided with the liquidity and a lot of technical tools to analyze the market before making any trading decision.

After doing the proper analysis using the technical tool, the traders now can buy r sale the assets with just a click using their own device while sitting anywhere at any time. To buy or sell the assets from the exchange platform, the traders need to pay some fee. This is known as trading fee. Usually trading fee is not that much high. The trading facility is available to the traders 24/7. In the crypto market, the real and main goal of each trading is to make money.

The traders use their money and capital to buy the crypto coins. The best time to buy the coin is when the price is low. In future, if price rise up, the traders can sell their assets and make money. For example suppose that i have bought 1 BTC in 45,000$. In future if price raise to the 50000$, i will be able to sell the BTC and can earn high profit.

The values of the assets keep changing time to time. The traders buy the coin when price is low. They then hold the coin until the price raise up. Then they sell the coins and earn profit. And again, they wait for price to decrease in order to buy the coin.

The coin's prices are not consistent and fix but keep changing. This is because of the Supply and Demand law. When demand of the assets increase, supply decrease. In this case, the value of the assets increase. Similarly, when the demand decrease, supply get high and price get low. So the demand and the price are directly proportional to each other. On the other hand, Supply and the Price are inversely proportional to each other.

SO the trading of the assets on the exchange platform is so simple but one should be very careful while buying and selling the assets. We cannot buy a coin blindly but need to focus on multiple parameters like price of coin, demand and supply law, liquidity of platform. The emotions of the traders are also matter a lot in order to make the trading successful.

Before making any trading decision, trader should focus on all these and all other important parameters. He should be well up to date with the market structure. He should also be clear about the risk involve in trading and should have proper knowledge about risk management.

The traders can buy the crypto currency to hold it for long term or can perform short term trading. In short term trading, the short term traders who are also known as the intraday trader want to make the quick profit. They predict the market future. They perform technical analysis to analyze the market future.

The history of the coin is examine during the technical analysis because it is believed that the traders repeat their emotions and what happened in past will happen again in future. A lot of the technical analysis tools are available in the market to analyze the coin like indicators, charts, etc.

These tools are available to use for the traders. Now it all on the traders ability that how he analyze the market using these tool.

In the financial market, the main goal of each trader is to make money. But some risks are involved in the trading. The big investors are the one among these risks. The big investors have the high influencing power. Their move effect the market alot. They want to make the profit for which, they want the price to hit their desired price. For this, they generate the liquidity to enter into the market. They hunt for the small players in the market for generating the liquidity so that they can get their goal.

Now we have two type of the investors in the market. One is the Week hand players/investors and other are the strong hand players/investors.

• Strong Hands

The trader who trade with high volume capital are the Strong hands. Strong hand players are those who hunt for the week hand players to generate the liquidity in the market so that they can get the profit which they want. The Big hand investors have the much influencing power and they also known as the "Whale". Their moves effect the crypto price a lot. This mean that they can change the asset's price at any time with their moves in order to get their desired profit.

The banks, the high financial institutes, etc make these whales with large amount of the capital.

In the above screen short, we can see how the whales have hunt the small traders to generate the liquidity in the market. In the accumulation phase, the Strong hand started buying the coin at very small level. Because of this move of the strong hands, the price already started rising slowly and the bullish reversal is expected by the small hands in future.

The sellers who were selling their assets will stop their position in lose with hope of the bullish reversal in up coming future. The traders will enter into the market because an uptrend is expected. The strong hands already have purchased the coin at low price. Then following them, the retail traders have entered into the market. Because of high buying pressure, demand got high which result the price of the assets raised up and the uptrend occur in the market.

When the price raised up and hit the profit level set by the big and strong hands, they close their position and earned the profit. Some traders were still buying the coin. This is the distribution phase. After this move of strong hand, price started moving downward. The trader who bought the coins at the high price were at the lost. The strong hand traders always hunt the retail trader to generate the liquidity in the market in order to take their desired profit. This cycle keep repeating in the market.

• Weak Hands in Market

The trader who trade with the low volume capital are known as the weak hands. These retail traders face lose because of the manipulation of the strong hands. These are the traders which the strong hands use to generate the liquidity. Following the whales, usually the weak hands face the lose. They have the small capital and they have no influencing power. They cannot effect the market price with their small capital.

They follow their emotions in the market. When the strong hands buy the coin in small volume, the weak hand take it a good opportunity to buy the coin with hope that market will enter into the bullish trend in upcoming future. The demand get high and price rise up. When the strong hands reach to their desired profit, they sell the coins and hit the stop lose for the retail traders like me and all other who trade with small capital.

Now the price start falling down and the retail traders have to stop their buying position and now have to sell their coins at low price. They face lose. The selling pressure decrease the coin's price. The strong hands again enter into the market by buying coin at low price. The weak hands again get trap and again start buying coin and this cycle continue

There are a lot of the traders who follow the youtube, or tweets of the big influencer to make the trading decisions. They do so by considering the youtubers more experienced. They follow the news because they think that the news of the big influencers effect the market price. If the influencer give some hint that price will rise up, they start buying the coin but usually they have to end their trading in lose because the influencer buy the coin before giving statement about it.

We should not follow our emotions and sentiments in trading. Trading by following the news, youtube or other herds is a bad habit and the trader face lose by trading like this. Trading with emotions and sentiments is considered a bad thing in crypto market. The news and the herds are because the big influencer want the price to spike up. The retail traders consider it a good chance to enter into the market. They buy coin at high price as compare to the strong hands. Their demand spike the price up. When price reach to the strong hands desired level, they trade in opposite direction leaving the retail traders in lose.

The above is the screen short where we can see that after a long spike, the price declined by the big move of influencer. So instead of following herds, the traders should do trading like pro. The Pro are the strong hands in the market whose move effect the price. They know how and when to move the price at which direction. So by thinking like Pro, we can understand their moves and can earn high profit too. We should buy the coins when price is low and should sell them when price is high. Instead of following the hers and sentiments, we should follow this rules to earn profit and to safe from lose.

The trend identification is the most important thing to consider before taking any trading decision. The traders should identify the trend first before entering into the market. The trend identification will help the trader to identify which direction market is moving. This will help to identify whether to buy the coin or it is best selling spot.

The traders who do not follow the trend usually remain in lose. They usually end their trading in lose. So instead of going counter, we should identify and follow the trend. There are a lot of the methods in the crypto market to identify the trend. We can use multiple technical indicators to identify whether it is the bullish trend or bearish trend. We can use the market structure, chart, etc. The market can be in uptrend, downtrend or side way moves.

• Uptrend

When the price of the coin is low, the trader find it a good spot to enter into the market. The demand get high because of which the price start moving from down to top making the higher high and higher low series. Each higher high is higher than previous high. At this point, the market is said to be in uptrend.

• Downtrend

When the price of the coin is high, the trader find it a good spot to exit the market. The demand get low, supply get high because of which the price start moving from top to down making the lower low and lower high series. Each lower low is lower than the previous low. At this point, the market is said to be in downtrend.

When the market do not move in particular direction, this is said to be in ranging zone or sideway moves. The price move in sideway moves without moving in a clear direction. The direction is now clear at this time.

Identifying Trend using EMA

The EMA is an indicator which help to identify the trend. Exponential Moving Average is a popular and well known trend based indicator which is use worldwide to identify the market trend. This indicator was introduced to solve the LAG in the MA. The high weight is given to the price data point that occurred at the same time. In the simple MA, we face the problem of lagging. The MA is lagging indicator where the produce the late signals.

But the EMA has solved that lagging problem of MA and does not delay in producing the signals. When the EMA line move above the price on the chart, it produce the bearish signal. The exit signals are also produce when the price is trading below the EMA line. When the EMA line move below the price on the chart, it produce the bullish signal. The entry signals are also produce when the price is trading above the EMA line.

If we talk about the Elliot theory, this is also use to identify the trend. The traders in the crypto market use this theory to get to know in which direction the market is moving. It is also use to identify the trend reversal points. The Elliot theory has the impulsive and corrective waves. The impulsive waves comprise of 5 waves which move in the trend direction. These use to identify the trend. The corrective waves are formed after the impulsive waves and use to identify the trend reversal.

In the below screen short, the 1-5 waves are the impulsive waves which are indicating the market trend. The corrective waves then formed after the impulsive waves which are a,b and c. These waves show the trend reversal points.

5. Show how to identify the first and last impulse waves in a trend, plus explain the importance of this. (Use cryptocurrency chart screenshots)

To identify the first wave in the trend, we need to make sure that the wave 1-5 is form. After formation of wave 1-5, now we need to identify the corrective wave. I have marked them below as a,b and c.

In the above image, we can see that the wave 1-5 has been formed. We have identify the corrective wave as a,b and c. The left side of the wave 1-5 is the bearish trend. market is falling down. There are the lower low moves. Then we will look out the corrective waves which are the a , b and c. Here the a and the c form the higher high. The higher high form by the c must be higher than the a. If the C higher high is higher than the A higher high, this may the be the start of the new trend.

To identify the last impulse, we again look out the Elliot Wave theory. We will count the maximum point of the wave. The maximum wave points to count is wave 5. In the below screen short, the wave 5 is formed. After the creation of the wave , the price didn't go the more lower. Price failed to form another lower low. After the point 5, the correction wave a,b and c started. This is the last impulse where the trend reversal signals are produced and a new trend has been started. This signal the beginning of new trend. The traders now focus to close their sell position and open the new buy positions to take the advantage of the new trend.

TO form the Elliot wave, we need to make sure that there are five impulsive waves and 3 corrective waves. The impulsive move in direction of the trend while the corrective waves show the trend reversal. TO complete the impulsive wave, the first, third and fifth wave form the higher high and each is greater than previous one. The fifth one is the peak and serve as resistance.

If we talk about corrective wave, they form after the impulsive wave and show the trend reversal. We can get the good point to sell and to buy the coin after the last impulse wave. In the below screen short, we have formed the Wave 5 whose high point is the 5. This point is serving as the resistance point in the below screen short.

After the wave 5, we the corrective waves a, b and c are formed. After the corrective wave, the pause after the higher high is the best entry spot. We can place the buy order by setting the stop lose and take profit. The stop lose is set below the previous lower low. The take profit is set as below.

Now for the sell order, we will consider the 5 wave again. We will form the 5 waves and after that, the corrective wave will be formed. After the wave and the corrective wave, the best selling spot will be find when the coin's price decline and break the resistance point. The resistance point is drawn as a parallel line. This is the level equal to the lower low of the wave 5. When the price move down and break the resistance level, we will place the sell order at the parallel line when the resistance will be break. The stop lose will be set above the higher high of wave a and take profit will be set as below.

The Elliot wave theory has a relationship with the method explained in this class. We have discussed the strong hand and the weak hand above. The accumulation and distribution of the strong and weak hand can be identified using the Elliot wave theory. The below is the screen short where the 5 wave has been formed. Then the corrective waves a,b and c has been formed. Then the distribution phase has been started to trap the retail trader.

The accumulation and distribution phase of the strong and weak hand can be seen in the first and last phase of the elliot theory. In the below screen short, we can see that the accumulation phase is before the first wave of Elliot theory after which, the new trend has been started. Then the distribution phase is observe at the high point where the strong hand close their trade by taking profit and the price got reversed. This phase is seen as the corrective wave of the Elliot theory. After this, trend has been reversed.

This theory help the retail and weak hand traders to understand the strong hand moves. They can understand when they strong hand push price up and when the pull price down.

The trading is the exchange of the values, assets to make the profit. We perform the trading with expecting that in future, either the value of the asset will be decrease or we expect that price will decline. In the crypto world, trading is performed on some exchange platform like Binance, Huobi, kraken, etc. These platform make it easy for the traders to perform trading within no time and less trading fee.

The professor @nane15 has explained the weak hands and strong hands in detail. Then we discussed that instead of trading by following the herds, we should do trading by perform the technical anaylsis.

The trend identification is extremely important to perform trading in successful way. There are a lot of method to identify the trend. The Elliot wave theory has been explained by professor which also help to identify the market trend and trend reversal. This theory also help to determine how the strong hands take moves in market. AT the end, we should always consider the risk factor while trading. We should invest only those fund which we can afford to lose.

Cc
@nane15