Basics to trade cryptocurrencies correctly. | Part 1- Crypto Academy / S6W1 - Homework post for nane15. 12/02/2022
Introduction
Good day my fellow steemians, the professor am very delighted to be alive to be part this great season of the steemit cryptoacademy.
Having knowledge of Cryptocurrency trading basics is very important to any newbies as it will help you in the journey to making good progress. There are many ways in which you can practice cryptocurrencies, trading yoy can study books about crypto currency and also watching videos that teaches cryptocurrencies. The difference candles sticks you are all part of it.
Here are different questions that answers some of the many questions that you may like to know.
1. What do you understand by trading? Explain your understanding in your own words.
Trading in a lay man understanding it is the buying and of goods and services at a certain low cost and selling it for more profits.
Coming to understand the civilised world there are different types of trading. For example we have cryptocurrency trading, the forex trading, the trade by batrer where people get to buy things with the use of cash but with the exchange of stock to stock. This is done by using what you have to get what you want in the market either food stuffs for a pair of shoes or for other important things to you.
Basically the aim or objective of trading is to buy goods and to sell it to make profits in the end. When you go against the principle of the trading we are talking about that means you be loosing out in the trade.
Naturally to trade is just more than just buy and sell to make profits, in the crypto market industry the market is so manipulative. Before you go into the crypto market you have to look at certain things.
The fundamental things are to be taken into consideration before investing in any projects. You have to know the reason for the project, how far the project intend to go, what are the goals of the project.
The Fundamental analysis: this is an analysis carried out to study the kind of project that you are about to be an investor, you will have to the calibration of people backing up this asset, the general impact of this project on the general public. The objective of the project is also to be considered before taking part in it.
We also have the technical analysis. The technical analysis is the aspect where the graphic design comes into play. The traders study to check the movement patterns of the asset, the strategies to be applied by looking at the patterns. The technical analysis help the investor to know when and how to make any entries into the market.
Sentimental analysis, this works with the trend of the news flow. This sentimental analysis is largely controlled by the number of information received by individuals. When a positive news circulates it will affect the market positively so the investor make their decisions base on the new they got and if a negative news come the trend of the market will fall.
2. What are the strong and weak hand in these market? Be Graphics and Provides a Fully Explanations.
In many occasions small traders, small investors who has no strong confident their strategy used in the market most of them buy when the market is in the the bullish trend with few percent, because they have little knowledge about how the market is being controlled.
The market is being manipulated by the strong hands in the market who are called Whale's, examples are the like of the large financial firms, mutual funds. The strong hands are also the big men and women who has companies with huge capital to buy high volume of money. By so doing this will affect the price of the market is either to bring the price down or push the price in an upward trend.
The strong hands when the market is in the bullish trend with few percent high the strong hands with huge capital who bought at the lowest possible prices in stages will leave the market gradually and that is when the weak hands will make an entry into the market thinking that the price will keep upward trend and few minutes later there after the market will drop and trap them in the market making them loose their capital.
The strong hands aims at buying or selling their assets in large quantities so as to make better profits in the market at once and make the market drop to it initial stage so that they can enter the market again.
Like I said the the image above explains the way the strong hands buy with capital when the market is at the lowest price and they sell at the top once the market moves up. And as for the weak hands they buy at the middle when the price is on the bullish trend with few percent when the strong hands are already leaving the market gradually thereby making the price to drop.
As you can see the strong hands will observe the market again and allow the price to drop to a reasonable level then buy again in a position where they can sell once the price is moving up, they take every opportunity on the uptrend to make profits in the market.
Talking about the weak hands, They are majorly the retail investors, traders, and market retailers, of all kinds, the majority of those who lose money in a market, they are the ones that the strong hands takes advantage of by buying their positions at a very low price because they are not always patient to wait to open a clear position. This happens when the same weak hand starts selling off thinking that the price will continue to drop further. The weak hand if not careful enough most time sells off at lost thinking the market is dropping and after a while they buy another position at a higher price because they see the market moving up again, some even loose before buying another position.
3. Which do you think is the better idea: think like the pack or like a pro?
In my little way of understanding this question people intend to do things in their own way because that is how they understands the market but there are other professionals who make sure that the retailers are pushed to one side in the market by the roles the play in the market, many has decided to follow the trend of the market many professionals make huges capital in their trade, in any occasion if any piece of news surface they make use of the opportunity and take advantage, and when this happens the strong hand in the market takes advantage of the situation. This method is always the worst way because most decisions are driven my emotions there by pushing the retailers to be trap in the end.
So to the study of the explanation I prefer and see the pro as the best way of trading. When the professional move we move, their constant attempts made to manipulate the market will not aftect the small traders. We have to follow the principle of buying very low and selling very high to make profits by so doing we won't be trapped until when we trade base on emotions.
4. Demonstrate your understanding of trend trading. (Use cryptocurrency chart screenshots.)
Trend trading is a strategy that involves traders analysing the direction of trend before taking action on when to make an entry into the market. For an upward trend, traders would look to go long and buy, and when an asset is seeing to move a downtrend, traders would look to go short and sell off their orders. Trend trade is one of the most profitable methods of trading. They trade with a short period because they have huge amount of money to open a position in the market.
The chart here is an example of a trend pattern which the Elliott waves says. From the number "1" the market is obviously observed carefully before making another position for "2" the Elliott wave has five waves which explains the pattern which is operated in this chart.
It is carefully planned as shown above so that they will not enter trap. Each candle sticks has where it ends before another candle will surface and that is the method it keep following. Though sometimes it is not always going to play in that pattern. It makes investor wait a longer time before taking a position in the market.
5. Show how to identify the first and last impulse waves in a trend, plus explain the importance of this. (Use cryptocurrency chart screenshots)
An impulse wave pattern is a technical trading term that describes a strong move in a financial asset's that makes price to coinciding with the main direction of the underlying trend. The pattern of this trend is in a ziz zag pattern.
Here is the first and last impulse pattern this explains the beginning of the trend, entry of the market and last point where the market is, every point is observed well before opening a position so as to make sure profit is attained.
6. Show how to identify a good point to set a buy and sell order. (Use cryptocurrency chart screenshots)
In setting a good buy order in a market trend is always good we study the pattern of the market very closely before opening up an order. I shall demonstrate this with a clear cryptocurrency chart.
This chart demonstrate a good buy order and a stop loss order which will prevent a reverse in the created buy order. Each buy is observed carefully before they are opened.
7. Explain the relationship of Elliott Wave Theory with the explained method. Be graphic when explaining.
In trying to look into the relationship between Elliott wave theory and the explained method. Normally we look at the market study it carefully and place an order from a certain position.
The Elliott wave pattern is actually the five wave pattern not what you can always see in every market sometimes it is very difficult to locate the pattern, there is a particular trend of line it follows, every uptrend follows with a corrective wave and every downtrend follows with another corrective pattern. As you can see number "2" trend did not get to the number "1" point before taking an up trend to number "3" that as been the way it is going till it gets to wave "5" Anyone who follow this trend will not fall into dip in the market.
Conclusion
Cryptocurrency trading is something that has to do with the use of money and for that reason you are to make profits or run at loss if things like fundamental analysis or technical analysis are not taken into consideration before venturing into them. Do not allow your emotions to take the best out of you when taking a buy position in the crypto market and do not be greedy taking profit is a choice to make by individual as you are in control of your capital.
Thank you for reading that is all I can put up together on the topic.
Cc:
@nane15