1. a. What do you understand by a Trending market?
The trending market per my understanding refers to the price movement of cryptocurrencies in specific directions which are influenced by the activities of buyers and sellers of the assets in the crypto market.
The prices of crypto assets continuously change in the crypto market and the changes look similar or alike sometimes. Also, the changes that occur in crypto assets helps traders or crypto analyst to be able to predict the future trend of the assets. The trending market involves either the rise in the price of crypto assets or the fall in the price of crypto assets.
The trend of a crypto asset can therefore be defined as the direction in which the price of the asset moves within a period of time. Generally, the trend of Bitcoin is the influencer of all the other coins (altcoins). This means that the price movement of Bitcoin influences the price movement of the altcoins, i.e. when the price of BTC is in the Bullish trend then the price movement of the altcoins also starts to move in the bullish, likewise when BTC moves in the bearish trend the altcoins also do same.
Generally, we can say there are three types of trends in the crypto market and they include the following; uptrend, downtrend, and sideways trend. Traders usually study and analyze to which trend would be the future trend for a particular asset before investing or selling such an asset. Traders mostly use technical indicators in analyzing the trends and also predicting the future trends of assets as well.
1. b. What is a bullish and a bearish trend? (screenshot required)
The Bullish Trend
A bullish trend is a trend that displays a continuous rise in the price of an asset in the crypto market within a specific period. When an asset hits the bullish period traders or investors start to enjoy it because their monies start to multiply. Also during bullish periods, investors buy more assets in order to gain more profits as the crypto asset rises. Mostly, it occurs when the demand for an asset increases in the crypto market, and also the volume of the asset increases as well. The period in which a bullish trend continuously occurs is termed the bull season. I would like to illustrate a good example of a bullish trend in the chart below.
The Bearish Trend
A bearish trend is a trend that displays a continuous fall in the price of an asset in the crypto market within a specific period. When an asset hits the bearish period traders' or investors' monies are kept at risk and they tend to sell their assets. The period in which a bearish trend continuously occurs is termed the bearish season. I would like to illustrate a good example of a bearish trend in the chart below.
2. Explain the following trend identification and give an example of each of them. (Original screenshot needed from your chart). Do this for a bullish and a bearish trend.
i. Market Structure:- Market structure is a strategy that provides information about the progress and functioning of the crypto market. The market structure provides information regarding the rise and fall of a crypto asset and also whether an asset is in the stationary phase.
Looking at the market structure in the bullish trend, we found out that there are formations of higher-highs and higher-lows in the trend and this indicates that the price of the asset keeps on increasing. This again explains the fact that the price of the asset closed above the previous high point and then also the price of the asset traded below the previous low point. When a higher-high is formed, it gives the trader or investor the opportunity to buy the asset and on the other hand, when higher-low is formed, it gives traders or investors the opportunity to sell their assets. Below is an illustration of a market structure with respect to the Bullish trend.
Looking at the market structure in the bearish trend, we found out that there are formations of lower-lows and lower-highs in the trend and this indicates that the price of the asset keeps on decreasing. This again explains the fact that the price of the asset did not close above the previous high point and then also the price of the asset traded above the previous low point. When a lower-low is formed, it gives the trader or investor the opportunity to buy the asset and on the other hand, when lower-high is formed, it gives traders or investors the opportunity to sell their assets. Below is an illustration of a market structure with respect to the Bearish trend.
We sometimes experience what we call the Ranging Market where the price of the asset moves in neither uptrend nor downtrend but rather, it rises and falls at the support and resistance levels of the asset. I would illustrate a good example below from a crypto asset chart.
ii. Trendlines:- Trendlines are one of the tools that are used in the technical analysis of crypto assets. It helps in determining the direction of the trend of an asset in the crypto market on a chart. Mostly, when drawing trendlines, the first two high points are taken into consideration for downtrends and are being extended until you get a preferred position. Similarly, the first two low points are also taken into consideration when drawing trendlines for an uptrend.
In an uptrend movement of an asset in the market, when the trendline is drawn and the price of the asset hits or touches the trendline, it creates support and then moves up again. Traders or investors can make good use of this tool to acquire more profits in their trades. Until the trendline is broken, the price of the asset would continuously bounce back and move in the uptrend and when the trendline is broken, then it indicates the time to exit the trade position. Below is a good illustration of an example on a chart.
In a downtrend movement of an asset in the market, when the trendline is drawn and the price of the asset hits or touches the trendline, it encounters a resistance level and then moves down. Traders or investors can make good use of this tool to avoid losses in their trades. Until the trendline is broken, the price of the asset would continuously bounce back and move in the downtrend and when the trendline is broken, then it indicates the time to enter a trade position but before entering one must use other technical indicators in order to confirm. Below is a good illustration of an example on a chart.
3. Explain trend continuation and how to spot them using market structure and trendlines. (Screenshot needed). Do this for both bullish and bearish trends.
In the case of market structure, trend continuation is formed or occurs as a result of the constant fluctuation in the market price of an asset, that is the constant repetition of the ups and downs of the price of an asset in the crypto market. There is price continuation in the market because some traders or investors take profit by exiting the trade and others also enter new trade when they see the price of the asset falling. The following two statements are to be noted in both Bullish trend and Bearish trend.
Bullish Trend:-
- The New high must be higher than the previous high
- The new low must be higher than the previous low.
Bearish Trend:-
- The new high must be lower than the previous high
- The new low must be lower than the previous low.
The following statements indicate that as the resistances are continuously tested and broken in a bullish trend, the supports are also broken by being tested in the bearish trend again. When the above statements are not in order or do not occur in a trend then the trend tends to be weakening and it's possible to change in direction of its movement. I would like to illustrate the following on crypto charts for more understanding.
In the case of Trendlines, trend continuation occurs when the trendline drawn is not broken. When the trendline is broken, then this signals a possible trend reversal in the price movement of the asset. I would like to illustrate this also in the following charts shown below.
4. Pick up any crypto-asset chart and answer the following questions.
i. Is the Market Trending? :- Looking at the 4hour SHIBUSD crypto pair chart below we can see that the current market trending in the market is in the ranging market, meaning there is no trending trend as we can see. It can also be noticed that on 04th November 2021, the bearish trend was broken and a continuous zig-zag formation of trend is seen between the resistance and support levels. This, therefore, explains that there is no market trend in the chosen crypto asset.
ii. What is the current market trend? (Use the chart to back up your answers).
From the chart below, we can clearly see that there is no visible trend of the price of SHIBUSD currently but rather it is visible in the Ranging Phase as seen below. We saw that during 4th November, the bearish trend of the asset was broken and a continuous formation of the zig-zag trend was observed. This leads to the formation of the consolidation phase or the ranging phase in the market price of the asset.
5. Conclusion
To conclude, I would like to summarize what we have done so far here in this article. First of all, we looked at the concept of trending market where we define trending market and also explained the types of trends we have as well. Again, we looked at what bullish and bearish trends are and also illustrated them using crypto charts. Furthermore, we discussed some of the trend identification with an example using crypto charts, i.e. market structure and trendlines.
Moreover, we discussed the concept of trend continuation and how to spot them as well as using crypto charts with respect to market structure and trendlines. Finally, I chose SHIBUSD currency on a chart and explained the market trending of the asset as well as the current trend of the price of the asset in the market.
I would like to say a very big thank you to professor @reminiscence01 once again for this wonderful lecture. I have really understood the concept of trending markets. Thank You.
Link to my Original Post @steemcurator02
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit