Welcome once again to another wonderful episode in the crypto Academy community. Before I present my homework post, I would like to acknowledge the professors and the crypto Academy community for making such an educative lecture possible. Today’s topic is simple .Crypto Trading Strategy with Triangular Moving Average (TRIMA) Indicator
Without wasting enough time I would present my homework post systematically based on the questions from professor @fredquantum.
What is your understanding of the TRIMA indicator?
Moving averages are trend indicators that analyze past price movements to determine an asset's price direction. Traders employ a variety of moving averages to do market analysis. They typically use them to spot price trends in an asset. The simple moving average (SMA) is an indicator that uses the value of an asset's average closing price from prior price data to generate an oscillating line that moves on the asset's price chart based on the average value derived.
The Triangular moving average (TRIMA indicator) is a double-smoothed and advanced simple moving average created from its simple moving average values. The TRIMA indicator eliminates price lags and odd price fluctuations in the price movement of an asset. The TRIMA indicator is a very good and efficient indicator that can be used to identify trends and structures in the various asset class, especially cryptocurrencies.
The crypto market has a high level of volatility, resulting in unusual price movements. With the current level of volatility in the crypto market, a good indicator like the TRIMA indicator is needed to smooth out price movements and reduce price lags and fluctuations.
Setup a crypto chart with TRIMA. How is the calculation of TRIMA done? Give an illustration. (Screenshots required).
How to add TRIMA indicator to price chart
Before you can add a TRIMA indicator to a chart, you need to access a trading or market analysis platform that supports the use of more indicators.
[tradingview](tradingview. com) is my most preferred platform to use the TRIMA indicator.
The picture below is what tradingview looks like.
Click on the indicator icon at the top row to choose your indicator. (TRIMA indicator)
A list of indicators will be shown to choose from but I searched for TRIMA Indicator to make it easy.
You can search by tapping on the search bar then type a keyword in the name of the indicator( Triangular moving average)
After selecting TRIMA Indicator, it will apply to your price chart.
A green moving average line will move on the chart.
Move to the name of the indicator on the top left corner of the price chart and click on the settings icon.
The default setting of the TRIMA indicator's period is 10. A period of 10 is not great for swing traders. It is used for scalpers, traders who look for opportunities in a short period. For swing traders, a period of 20 will be great for good indications.
After clicking on settings, edit the period from 10 to 20.
Trima Indicator calculation
The TRIMA indicator uses a mathematical formula to calculate the simple averages. Then apply to smooth on the simple moving averages.
**SIMPLE MOVING AVERAGE VALUE **
SMA= (price₁ +price₂ + price₃ +…..priceₙ)/n
Priceₙ is the last price recorded.
n is the number of periods observed.
The mathematical formula is used to determine the SMA price over an n period.
TRIMA= (SMA₁ +SMA₂ +SMA₃ +…SMAₙ)n
The TRIMA formula sums SMA values over a period n.
Identify uptrend and downtrend market conditions using TRIMA on separate charts.
Most good traders or professional traders consider the trend in the market before making market decisions. Some traders do not trade against the trend in the price of an asset. Traders need to identify the trend in the market to make decisions. TRIMA indicator is a good indication to identify the trend in the price of an asset. The TRIMA indicator can be used on every timeframe to identify the trend in the market, it can be used for both swing traders and scalpers.
Uptrend
An uptrend is when the price makes series of higher highs and higher lows.
The picture below is a market trending up.
The above chart is the 5-minute chart of BTC/USDT.
Price in moving in higher highs and higher lows.
Downtrend
A downtrend is when the price of an asset moves in a lower high and lower high. A downtrend can be identified in any timeframe.
The chart below is a downtrend market.
Price is BTC/USDT 5 minute timeframe forming a series of lower highs and lower lows.
With your knowledge of dynamic support and resistance, show TRIMA acting like one. And show TRIMA movement in a consolidating market. (Screenshots required).
**Using TRIMA indicator as dynamic support and resistance **
Support and resistance is a strategy that most good traders use. Support and resistance are key and historic price zones that reversed price. Support and resistance zones can be used as price ceilings and price floors in the market. For dynamic support and resistance, traders do not have to draw horizontal lines. It automatically plots the support and resistance. The TRIMA indicator is an example of dynamic support and resistance.
The TRIMA indicator is good dynamic support and resistance. In an uptrend, the price uses the TRIMA line as support after retracement and in the downtrend, the price uses the TRIMA line as a resistance line after the price retrace.
The above chart is the 1-hour timeframe of the ETHUSDT. Price is using the TRIMA line as dynamic support after it retraces.
The chart above is BTCUSDT in 5 minutes timeframe. The price is in a downtrend and uses the TRIMA line as a resistance if it retraces.
TRIMA indicator in a consolidating market
In a consolidation market, there is no ideal direction in price. The price is ranging within key support and resistance. During a consolidating market, the TRIMA line moves inside the price because there is no ideal trend in the market.
The above chart is BTCUSDT 5 minutes timeframe. Price is ranging between a support and resistance with the TRIMA line through the range. A new trend will start if price breakouts of the consolidation.
Combine two TRIMAs and indicate how to identify buy/sell positions through crossovers. Note: Use another period combination other than the one used in the lecture, explain your choice of the period. (Screenshots required).
The TRIMA indicator helps reduce lags and price fluctuations in the market. A trader can combine two TRIMA indicators with different periods. One can have a short period setting with the other having a long period setting. The short period setting reacts differently from the long period setting, with the shorter period reacting faster to the price movement and the longer period setting reacting slower to price movement.
Combining two TRIMA indicators will help remove lag and help traders make good decisions on when to buy or sell an asset.
I use 20 periods and 40 periods on the chart.
Buy TRIMAs Crossover
When the TRIMA line with smaller period settings (20) crosses above the TRIMA line with higher period settings (40), it indicates a bullish signal. A bullish trade can be executed after that crossover.
The above chart is BTCUSDT 5 minutes timeframe. The TRIMA with a lower period setting (20) crossed above the TRIMA with a higher period setting (40) which indicates a buy signal.
Sell TRIMAs crossovers
When the TRIMA line with the smaller period settings(20) crosses below the TRIMA with the higher period setting(40) indicates a sell signal. An instant sell execution can be taken on the asset.
The chart above is BTCUSDT 5 minutes timeframe.
The TRIMA line with the lower period setting (20) crosses below the TRIMA line with the higher period setting(40). This indicates a sell trade.
consolidation market
In a consolidation market, the TRIMA with the lower period and higher period settings overlap with each other with no ideal upward direction or lower direction. The price can break out of the consolidation at any time so traders have to wait till there is a break out before they take any trade.
The chart above is BTCUSDT 5 minute timeframe. The price is in consolidation. The market price is ranging between support and resistance and the two TRIMA lines are also overlapping. A trader has to wait for a break out before taking my trade.
What are the conditions that must be satisfied to trade reversals using TRIMA combining RSI? Show the chart analysis. What other momentum indicators can be used to confirm TRIMA crossovers? Show examples on the chart. (Screenshots required)
Previously, we used two TRIMA indicators to generate signals. With the trend reversal, using the TRIMA indicator alone will cause lags and give late signals. For better experience and better signals, we combine the TRIMA indicator with another powerful indicator called the Relative Strength Index (RSI).
Criteria for trading bullish reversal using TRIMA
Add two TRIMA indicators to the chart, one with a high period and the other a low period setting then add the RSI indicator.
In a downtrend market, the RSI must move down to the oversold region to indicate a potential bullish reversal.
Wait until the TRIMA line with the shorter period cross above the TRIMA line with the longer period
As a good trader, you have to wait for at least two bullish candle confirmations to indicate the strength of the buyers in the market before you take your buy executions.
Apply proper risk management by putting stop loss and taking profit at the appropriate places and using a 1:1 risk to reward ratio.
The above image is BTCUSDT 5 minutes timeframe.
The RSI reached the oversold region indicating a potential reversal with the short period TRIMA line crossing Above the longer period TRIMA line. A buy execution is taken right after the crossover and there are candlestick confirmations.
Criteria for trading bearish reversal using TRIMA
Add two TRIMA indicators, one with a lower period and the other with a higher period then add the RSI indicator.
Wait for the RSI to reach the overbought region in an uptrend to indicate a potential reversal.
The lower period TRIMA line must cross below the higher period TRIMA line
Take an instant sell execution after there are two bearish candlestick confirmations
Apply appropriate risk management by using risk to reward ratio of at least 1:1
The above chart is BTCUSDT 15 minutes time frame.
The RSI was at the overbought region with the TRIMA line with lower period crosses below the TRIMA line with the higher period indicating a good time to sell if necessary candlestick patterns are seen. After a good bearish candlestick confirmation, a sell is executed with good risk to reward.
Using two TRIMA indicators and MACD for a trend reversal
Moving Average Convergence Divergence is a trend-based indicator that combines two EMAs of an asset. The MACD can be used to identify the trend in the market whether it is bullish or bearish.
The above chart is BTCUSDT 5 minutes timeframe.
The MACD crossover and also the lower period TRIMA line cross above the higher period TRIMA line. This indicates a good setup for a bullish reversal.
The chart above is BTCUSDT 5 minutes timeframe.
The MACD EMAs cross and then the lower period TRIMA line crosses below the higher period TRIMA line to indicate a setup for a bearish reversal in the price of the asset.
Place a Demo and Real trade using the TRIMA reversal trading strategy (combine RSI). Ideally, bullish and bearish reversals. Utilize lower time frames with proper risk management. (Screenshots required).
A demo trade will be taken in this section to see how effective the TRIMA and RSI Indicator is.
tradingview.com and MetaTrader 5 will be used to make analysis and trade execution respectively.
The chart below is a demo trade on XRPUSDT.
- The price was at the oversold region of the RSI.
- The TRIMA line with the lower period crossed the TRIMA line with the higher period to indicate a trend reversal
- An instant buy execution was taken as soon as necessary candlestick confirmations were seen
- 1:1 risk to reward was used
The above chart is mt5
Trade was sold out after it hit the take profit.
Price changed positively by 0.67%.
The chart below is a demo trade on XRPUSDT
- The price moved to the overbought region of the RSI
- The TRIMA line with the lower period crossed below the TRIMA line with the higher period.
- An instant sell execution was taken as soon as necessary candlestick confirmation was seen
- A good risk to reward of 1:1 was used.
The chart below is XRPUSDT on mt5
A sell trade was taken at 0.82196 and it is currently running at 0.82092 showing a small profit.
The trades taken in the lower timeframe show the strategy is very effective.
What are the advantages and disadvantages of TRIMA Indicator?
Advantages of TRIMA indicator
The TRIMA smooths unnecessary price movements and fluctuations in the market.
The TRIMA indicator helps with its dynamic support and resistance to help in entry and exit on the market.
The TRIMA indicator helps to identify the trend in the market and also helps knows when there will be trend reversals with the crossover of the higher and lower period lines.
The TRIMA indicator gives an accurate indication compared to other moving averages. This can help traders to make consistent profits on the market.
Disadvantage of TRIMA indicator
TRIMA indicator is very effective in a trending market. When the price is consolidating, the TRIMA indicator can not be used effectively because of the series overlapping of the TRIMA lines.
TRIMA indicator needs other strong indicators to help get the best signals. To get a better signal and reduced lags in the price movement, a strong indicator like the RSI and MACD must be used with the TRIMA indicator.
Having too much confluence at a time rarely happens so the number of trades you can take in a day will be limited.
Conclusion
The TRIMA indicator is an advanced moving average that uses a double smoothing function to reduce noise and fluctuations in price movements. The TRIMA indicator has good accuracy and can be easily used in any timeframe.
TRIMA indicator can be used in confluence with other strong indicators like the RSI to give strong signals. TRIMA indicator is overall a better moving average that I recommend traders to use.
Thanks to professor @fredquantum for this great lecture.