Hello everyone. This is @ahmadchemist737. I am very excited to step into another week of the steemit crypto academy. This lecture is taught by the very respective professor @Dilchamo. This week, she has delivered lecture about the Effective trading strategy using Line chart. I have read the lecture for couple of time. At the end of the lecture, the professor have asked some question. I am going to answer all those question. So let's start.
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Chart
The Chart in the crypto world is define as the change in the price with respect to the time. These two quantities are put together to graphically represent the price movement of an asset over a specified time period. A lot of chart pattern are use in the crypto world for graphical representation of the price movement like Japanese chart pattern, Hollow candles, etc. The Line chart is one among them.
Line Chart
The Line chart is also the graphical representation of the price movement over a specified period of time. In Simple words, we can also define the line chart as the graphical representation of the Closing price. The Line chart consist of only a single line which is plotted using the closing price of an asset throughout a specified time period. The Line chart represent the closing price of an asset over a certain time frame.
The crypto world is highly volatile and the prices of the assets keep changing every time. The closing price is the price at which it get close in a specified time period. We use the closing price of the asset to represent the price movement in line chart.
The Line chart filter out the noise which is generated by the price movement and provide a very easy to read and simple to understand market structure. This also provide a lot of the trading opportunities which the traders can use to earn the profit. The most interesting thing about the Line chart is that this is so easy to understand that even the beginners can use it to start their trading journey.
The beginners have little knowledge about crypto market and cannot use the other chart pattern because to use them, one must have plenty of crypto knowledge and should be experienced too. In case of using the other chart patterns without having proper knowledge and understanding, the beginner may lose their money. But the Line chart safe them to do so. This chart pattern is very easy to read and understand. The beginners can trade in safe and easy way using line chart and can also learn about crypto while trading. This is the most important thing for beginner to identify the correct market current trend and to apply some strategy.
This chart do not provide much knowledge about the market but only give us a discrete piece of information. The closing price of the asset and the trend movement are the most important things in trading. Both these things are represented in easiest way in line chart. The old and new, both can get the trading opportunities using this chart pattern.
The Japanese candle stick chart is very popular chart pattern which use the closing, high, low, opening asset's price at a given time period to represent the market condition. No doubt that the candle stick chart give us much information about the market condition but it is difficult to read for new comers. The Line chart give us less but accurate information which is consider ideal for beginners to start and learn the trading.
Uses of Line Chart
1- The Line chart is very easy to understand. It represent the closing price of an asset over a specified time period using only a single line. This make the chart much easier to understand for new comers. The beginners can trade and learn crypto while trading using the line chart.
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2- The line chart helps the traders to identify the trend. The trend is most important thing to identify before taking any trading decision. The traders can earn profit by following the market trend. The Line chart is very helpful to identify the trend.
3- The Line chart also help to identify the support and resistance level. The closing price is only consider in the line chart. A collection of the price record is provided which help to identify the support and resistance level
4- This is usually more useful to identify the support and resistance level in the high time frame.
5- The Line chart also tell you about the various trading opportunities which you can use to earn the profit.
The support and the resistance are two main and major points in market about which if the trader have proper knowledge, he can earn high profit. These two are the points where the price of the assets bounce back to its original direction. The support and resistance level are determined by the number of the time the price of an asset has reacted around those levels in the pasts. To identify the support and resistance level, the price of the asset need to react around the horizontal level for three or more than three time. The strength of the resistance and the support level depend on the time period.
The support level is the level where the price of the asset is suppose to move upward direction. At the support level, the selling pressure deplete and the buyers are allowed to enter into the market and rise the price upward. The buyers are then come in control in the market. Huge pending buying order executed which push the market upward. The price bounce off the support level and the trend reverse into bullish.
The support for long time period is considered more strengthen. If the support level is just for few seconds, minutes or hours, it is not that much effective. The support level identified for longer time period is more effective as compare to the support which is identified for just few minutes or hours.
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The above is the ETH/USDT chart where the support was formed around. The price reacted between these two level for multiple time.
The resistance level is the level where the price of the asset is suppose to move downward direction. At the resistance level, the buying pressure deplete and the sellers are allowed to enter into the market and push the price downward. The sellers are then in control in the market. Huge pending selling order executed which push the market downward. The price bounce off the resistance level and the trend reverse into bearish.
The resistance for long time period is considered more strengthen. If the resistance level is just for few seconds, minutes or hours, it is not that much effective. The resistance level identified for longer time period is more effective as compare to the resistance which is identified for just few minutes or hours.
The above is the ETH/USDT chart where the resistance was formed around. The price reacted between these two level for multiple time.
Identifying the resistance level using the line chart is very easy. When the price line of an asset on the chart is repeatedly tested by the buyers but the buyers cannot be successful to overcome the selling pressure, that area is known as the resistance level. The buyers test the price line for multiple time but the buying pressure cannot overcome the selling pressure in the resistance level.
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In the above screen short, we can see that the price of the ETH/USDT is bounce back from a certain point for multiple time. That is the support point. The assets price has tested the support line for multiple time. When the support line will break, price will fall downward.
Identifying the support level using the line chart is very easy. When the price line of an asset on the chart is repeatedly tested by the sellers but the sellers cannot be successful to overcome the buying pressure, that area is known as the support level. The sellers test the price line for multiple time but the selling pressure cannot overcome the buying pressure in the support level.
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In the above screen short, we can see that the price of the ETH/USDT is bounce back from a certain point for multiple time. That is the resistance point. The assets price has tested the resistance line for multiple time. When the resistance line will break, price will rise upward.
Question 3
Differentiate between line charts and Candlestick charts. ( Demonstrate with screenshots)
Representation
- The Line chart is very easy to understand. The graphical representation of the Line chart is very simple and easy to understand. A single line is use to plot the closing price over a certain time period. Even the new comers and beginners can use it to start their trading carrier.
- But the Candlestick chart is a little bit complex. It is not that much easy. The trader should be experienced to understand it.
- The Line chart can be use to identify the support and resistance level. These two are very important price point to trade successfully. The Line chart can help the traders to identify these two price levels.
- The candle stick chart can also be use to identify the support and resistance level
- The Line chart do not give us information about the market volatility
- The candle stick chart give us information about market volatility
- The Line chart use the closing price only over a specified time period and do not provide much information about the price movement. .
- On the other hand, the candle stick chart use the opening, closing, high and low prices over a specified time period. This chart pattern give a lot of information about the price action and market structure.
- Only the closing price is use in the Line chart. So it filter out the noise generated from the price movement and a very clear, simple and easy to understand graphical representation of the price is represented for the traders in form of a single line.
- It is a little bit noisy as compare to the Line chart
- The Line chart is only useful for long time period. The long term traders can use it to setup their trading and to earn the profit.
- The candlestick chart is beneficial for long and short term trading. The traders of all time frame can use it.
- The line chart is very simple and easy to read. This is best for new comers to trade and to learn more about crypto while trading.
- The candlestick chart is good for the experienced traders. This is a bit complex to understand but provide a lot of information. SO the experienced traders should use the candlestick chart.
- Line chart is useful to identify the trend. The trend is very important to identify to start trading. One can identify the trend using Line chart and can trade successfully.
- The candlestick chart can also be use to identify the trend.
- The Line chart provide more accurate technical analysis of the asset over a specified time period.
- The candlestick chart provide less accurate technical analysis of the asset over a specified time period.
There are a lot of indicators which we can be used with the line chart.
RSI
The RSI is very useful indicator which is use for identification of market states, trend, structure, etc. This indicator is easy to use and simple to understand. The traders can get to know about the market oversold or overbought states using the RSI indicator. When the indicator reading cross the 30 level below and move downward, this indicate that market is in oversold state. When the RSI reading cross the 70 points and move upward, this indicate that market is in overbought state.
The Line chart cannot tell us about who is in control. Whether the selling pressure is high or buying pressure is dominants. For this and many other information, we can use the Line Chart by combining with the RSI.
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The above is screen short of the BTC/USDT where the RSI and the Line chart are combined. Initially, the market was in oversold area so the traders can buy the coin at this spot. Then the coin raised up and hit the resistance level. We can exit from the market but we first need to check whether the market is in overbought region or not. If market is in overbought region and the price hit resistance, we can exit from the market.
Moving Average
Moving average is very easy and popular indicator which is use to identify the market. When we combine the Line chart with MA, the accuracy and authenticity will get enhanced. When the price cross the moving average and move upward, we should enter into the market because the bullish season is expected. When the price cross the MA and move downward, we should exit from the market.
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In the above screen short, we can see that the price was initially above the MA. Then the price cross the MA and started moving downward. The sellers should consider it a good exit spot and should exit from the market. Then the coin started decline. When the price hit the MA again at the bearish trend and started moving upward, it is end of bearish and start of bullish. The traders should enter into the market then.
The Line chart is very easy to use and simple to understand. It give a lot of trading opportunities to the traders. Though is it much effective but when we combine it with other indicators, it accuracy get enhanced. I am going to use the MA crossing strategy (20,50) to identify the trend with Line chart.
Moving Average Crossing strategy
MA crossing strategy is a trading strategy where we use the Two MAs, one is of smaller period and other is of longer period. When smaller period MA cross the longer period MA and move upward, this indicate the uptrend. When the longer period MA cross the smaller period MA and move upward, this indicate the Downtrend.
To use the MA with Line chart, we first need to wait for the price to cross the MA first, then wait for the cross of MA to confirm the signals.
- Bullish Scenario
In the bullish case, the price should cross the MAs and move above. Then wait for the 20 MA to cross the 50 MA and move upward. This indicate that there is the bullish trend now in the market.
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Above is the chart where the price first was below the MAs, then price cross the MA and started moving above the MA, this indicate bullish but for confirmation, we need to wait for the cross over of Moving average lines. When the Smaller MA(20) cross the longer period MA(50) and move upward, this indicate that there is bullish trend. Both condition have been fulfilled and bullish trend has been confirmed.
In the bearish case, the price should cross the MAs and move below. Then wait for the 50 MA to cross the 20 MA and move upward. This indicate that there is the bearish trend now in the market.
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Above is the chart where the price first was above the MAs, then price cross the MA and started moving below the MA, this indicate bearish but for confirmation, we need to wait for the cross over of Moving average lines. When the longer MA(50) cross the smaller period MA(20) and move upward, this indicate that there is bearish trend. Both condition have been fulfilled and bearish trend has been confirmed.
Question 6
Investigate the Advantages and Disadvantages of Line charts according to your Knowledge
Advantages of the Line chart
The Line chart is very easy to understand. It represent the closing price of an asset over a specified time period using only a single line. This make the chart much easier to understand for new comers. The beginners can trade and learn crypto while trading using the line chart.
The line chart helps the traders to identify the trend. The trend is most important thing to identify before taking any trading decision. The traders can earn profit by following the market trend. The Line chart is very helpful to identify the trend.
The Line chart provide more accurate technical analysis of the asset over a specified time period.
The line chart is very simple and easy to read. This is best for new comers to trade and to learn more about crypto while trading.
The Line chart also help to identify the support and resistance level. The closing price is only consider in the line chart. A collection of the price record is provided which help to identify the support and resistance level
The long term traders can use the Line chart to trade succesfully.
This is usually more useful to identify the support and resistance level in the high time frame.
The Line chart also tell you about the various trading opportunities which you can use to earn the profit.
Disadvantages of the Line Chart
- It is not suitable for short term trading. The Intraday traders cannot use it for their trading.
- It do not give us information about the market volatility.
- This do not give us more information. It use only the closing price which give us less information.
- It do not work efficiently without combining with other indicator. Its accuracy get enhanced when we use other indicators with it. So it rely on other indicators.
Conclusion
The Line chart is also the graphical representation of the price movement over a specified period of time. In Simple words, we can also define the line chart as the graphical representation of the Closing price. The Line chart filter out the noise which is generated by the price movement and provide a very easy to read and simple to understand market structure. This also provide a lot of the trading opportunities which the traders can use to earn the profit.
This chart pattern is very easy to read and understand. The beginners can trade in safe and easy way using line chart and can also learn about crypto while trading. The closing price of the asset and the trend movement are the most important things in trading. Both these things are represented in easiest way in line chart. The old and new, both can get the trading opportunities using this chart pattern.
Cc: @dilchamo