Recognizing Simple Patterns In Trading - Crypto Academy / S5W2 -Homework Post for @sachin08
- What is your understanding of Triangles in Trading? Explain all forms of triangles in your own words. (Screenshot required)
In finance trading, charts frequently shape exceptional patterns, and over the years, merchants and monetary analysts have identified, named, and categorized some of these patterns based totally on the structure or how they are viewed in charts. For instance, some of these patterns shape shapes and so they are named after distinctive shapes they form.
Triangles in trading are nothing however chart patterns that show up on a chart dictate one-of-a-kind kingdom of a market at a precise length of time. When triangles chart sample form, there may also be a continuation of a style or reversal of a trend. This potential that triangles chart patterns are each continuation and reversal pattern.
There are two vast sorts of triangles in trading. They are symmetrical and asymmetrical triangles. But the asymmetrical triangle is similarly classified as ascending triangle and descending triangle
Ascending Triangle
An Ascending Triangle is a kind of triangle that is shaped when a bullish go pauses and consolidates for a whilst such that the one facet of the triangle(upper side) shape a flat aspect whilst the decrease section hold rising till a spoil out to the upside for bullish fashion to continue.
As viewed in the screenshot uploaded above, the charge continues shedding every time it reaches the flat facet of the triangle and this suggests that the consumers are extra more suitable than the marketers due to the fact the shopping for stress hold rising the place the granted place stood still. At some point, customers violently dragged the rate upward and a breakout of the flat trendline came about as considered in the screenshot above.
Descending Triangle
Descending Triangle is every other structure of sample in trading. This sample is the replicate picture of ascending pattern. While ascending samples show up in a bullish direction, descending triangle samples take place all through a bearish move. This triangle has a flat facet in the downward facet and the top facet holds lowering till a ruin of the flat side.
As considered from the photo above, the charge continues bouncing lower back at each method of the flat aspect of the triangle, this indicates that the shopping for electrical weakened in contrast to the promoting pressure. At a point, the vendor later dragged the fee with full pressure downward and the spoil of the flat facet happened as established in the photograph above.
Symmetrical Triangle.
Asymmetrical triangle simply as its title implies has the two aspects of the triangle comparable to every other. What does this mean? This potential that each the top and the decrease aspect of the triangle maintain lowering and growing respectively. In different words, the two traces when drawn converge at a point.
The most important distinction between this triangular sample and the different sorts of samples is that a symmetrical triangle is impartial in that smash out may also happen in both directions. If the wreck out occurs to be to the upside, a bullish order is constantly envisaged however if it is otherwise, merchants appear for a promote order.
2 . Can we also use some Indicators along with it Triangle Patterns? Explain with Screenshots.
In finance trading, the easier way to have a terrific and proper risk of prevailing is never to rely on a single strategy. Because when it is higher to grasp an approach and to maximally comply with it, it is a long way vaster higher to usually verify the method with some equipment and this is the place symptoms come into the scene.
In the question given above in my own opinion, I say a confident YES to this given question, and my reasons are because indicators can be used alongside the special Triangle pattern we have mentioned in the subsequent paragraphs. By the way, what are indicators? Okay, I will say Indicators are gorgeous technical equipment that merchants or monetary analysts employed on charts for evaluation which supports them to comprehend the fee motion and the directional vogue of an asset throughout the period.
Combining Moving Average Indicator with Triangle Pattern, I will be displaying how an indicator can help a trader to better trade triangle patterns and according to the question given it needs a screenshot in which am gonna be putting down, now Let's take a look at the chart below.
The chart displayed is a chart of ETH/USDT on a 4hours duration frame. If u check the screenshots, a descending triangle pattern was benefited as indicated in the screenshot. Then two moving averages indicators are being amplified to this chart.
These two moving average indicators are a moving average of 20 and an Exponential Moving average of 50. The moving average indicator is shown to be in blue form while the exponential moving average is shown to be red.
I hope we can see a cross of the two moving averages arises even before the breakout of the descending triangle. This shows a bearish trend. Anytime there is a cross of two moving average to the downside, it symbolizes downward action. And when the price is trading below the moving averages, it implies the decrease of the asset, and interestingly, in the chart above shown and Immediately after the cross, the price began to trade, and below are the two moving averages. in a short period a break of the descending triangle materialized. And this is the best time or the perfect time for a trader to take a sell order. The two confluence a sell authorization from the moving averages and a breakout of a descending triangle further enhance the assurance to enter a sell order at this spot.
Using Bollinger Band Along with a Triangle Pattern Am going to be showing you another illustration and I will show how a Bollinger band could be utilized to improve the increase of the signal from the triangle pattern on a chart, now take a look at the screenshot uploaded here.
On this screenshot made you are going to notice an ascending triangle pattern that was placed. And was added to the chart is the Bollinger band. Bollinger band is known to be an indicator that assists a trader to understand the price action of an asset. It has three teams which are the upper band, lower band, and middle band. The lower and the upper band are the blue lines and the middle band is the brown line shown which follows the price of an asset as seen in the chart.
If u notice the chart uploaded there was a breakout of the ascending triangle and at this juncture, the trader would place a buy order. Now, the Bollinger band further reinforced the break signal which is from the ascending triangle in it after a breakout, and the price sticks to the upper band and for a long long time which symbolizes a powerful bullish trend. Let me enlighten you that, when a price sticks to the upper band of a Bollinger band, it exhibits a strong bullish trend and if it sticks to the lower band, it implies a powerful bearish trend. I hope we can see that apart from the convergence from the breakout, the Bollinger band also corroborates the buy order signal in this case. Therefore, indicators can be a great way of order assurance in finance trading.
3 . Explain Flags in Trading in your own words and provide screenshots of both Bull Flag and Bear Flag.
In the context of technical analysis, a flag could be a worth pattern that, in a very shorter timeframe, moves counter to the prevailing worth trend discovered in a very long timeframe on a worth chart. it's named attributable to the approach it reminds the viewer of a flag on a flagpole. The flag pattern is employed to spot the attainable continuation of a previous trend from a degree at that worth has drifted against that very same trend. ought to the trend resume, the value increase can be fast, creating the temporal arrangement of a trade advantageous by noticing the flag pattern. Flags square measure areas of tight consolidation in value action showing a counter-trend move that follows directly once a pointy directional movement in value. The pattern usually consists of between 5 and twenty value bars. Flag patterns will be either upward trending (bullish flag) or downward trending (bearish flag). the lowest of the flag mustn't exceed the point of the flagpole that preceded it. Flag patterns have 5 main characteristics.
•The volume pattern
•The consolidation channel
•A confirmation where price moves in the same direction as the breakout
•A breakout
•The preceding trend
If u notice u will see that the trend of the asset is bullish and there was a sharp move upward, this sharp move is known to be the previous trend. Then at this same point, it began to be centralizing as the buyers and sellers are pulling prices between themselves. This phase is the area under the backing and resistance line drawn in the screenshot made and this is the consolidation phase. And at the same time, there was a tremendous volume to the upside and a break-out transpired as shown in the screenshot made.
Bear Flag
we have a bull flag that exists to the upside and a bear flag that exists to the downward side. This screenshot shows, the asset is on a downtrend and a quick move of price to a downward side arises at a point. After this, a consolidation transpired such that both buyers and sellers keep pulling the price until a break out to the downside and after that, the seller came to the market with a great force and dragged the market downward and there was a break of the flag to the downside as clarified in the screenshot shown.
4 . Show a full trade setup using these Patterns on any Cryptocurrency chart. (Ascending Triangle, Symmetrical Triangle, Bear Flag)
ASCENDING TRIANGLE
If you check on notice the chart uploaded below which is the triangle setup. If you notice you will see the direction I drew my trend straight line which attends to as an opposition level and the upward-moving line attends to as a support level. This market constantly reverses, whenever it hits the resistance line, till when there was a breakout, then I took my entry... This market goes up till it hits my take profit.
SYMMETRICAL TRIANGLE
If u notice the chart down it currently shows a symmetrical triangle setup. This market was built at first and comes down hitting the support level and going up again so I had to make use of the symmetrical triangle too. make my access once there was a breakout before the market goes up and strike my take profit hope you could see my stop is set below the backing line.
BEAR FLAG
The chart below uploaded you gonna notice the bear flag set up and this bear flag was set after a huge downtrend in the market price. It seems to be a ranging market. The chart I set up is futures trading so I had to short the market by indicating that the price might go down after a strong bullish so I set up my stop loss at the top, predicting that the price will go down and when it gets to my take profit, it might want to execute.
They are several patterns formulated by the price movement. With the benefit of these patterns, traders receive an acceptable profit. In this lecture made, we have been able to discuss the Triangle pattern and Flag pattern.