Hello crypto enthusiast, meet me again @emmanuel-malume in another week of the crypto academy, today, I will be submitting my homework task to prof @abdu.navi03 on the topic Trading Strategy with median Indicator . which I will explain the topic as follows;
1-Explain your understanding of the median indicator.
2-Parameters and Calculations of Median Indicators. (Screenshot required)
3-Uptrend from Median indicator (screenshot required)
4-Downtrend from Median Indicator (screenshot required)
5-Identifying fake Signals with Median indicator(screenshot required)
6-Open two demo trades, long and short, with the help of a median indicator or combination that includes a median indicator (screenshot required)
The Median indicator is one of the Technical indicators used on a market cart to analyze the market movement, The indicator works comparably the same as the moving average indicator, and it shows signals using the purple and green color.
The Median indicator is a trend-based indicator which means the indicator follows the trend movement and shows signals regarding the trend movement, the indicator is best used on a short-term frame length due to the lags traders encounter with most technical indicators as the EMAs have a history of over filtering signals.
The Median indicator just as the name indicates the median or average value of the market using the ATR value multiplier from the past days shows a signal regarding the current movement, when this is gotten, the indicator uses the value to predicts the expectation of the next movement in the particular assets.'
The median shows a buy signal when it is showing the green color and the color is moving above the EMA middle line, and it also shows a sell signal when it is showing the purple color and the color is moving below the EMA.
The Median indicator has the following parameter on its input settings;
Median Source - The median source can be changed to Open, close, high, or low, but at defaults its settings are hl2
Median Length - The amount of data considered when calculating the median value, its setting is 3 at default.
ATR Length - This is the period of the ATR median value, it is 14 lengths by default.
ATR Multiplier - the value that is multiplied by the ATR value, its at 2 by default.
The Other parameter is the styles settings, Where you can change the band's color and also choose to increase the Color opacity and the thickness of the lines.
The Median value goes as the summation of the Upper band and the lower band divided by 2.
I.e, Median value = (Upper Band + Lower Band) / 2
Where, Upper bands = Median Length + 2ATR
Lower bands = Median Length - 2ATR
Just as I have said earlier, the Median indicator can help identify trend movement and market direction. The median indicator gives a buy signal when the middle line is showing the green line, in such case, the green line is moving underneath the market price, this continues to be in an uptrend market until the market breaks the green line to downward.
The image above is an example of a bullish market as we could see the market to be showing green lines and the EMA is moving below the market price, this continues until the middle color changes to purple which thus confirms a trend reversal.
The Median indicator can help identify trend movement and market direction. The median indicator gives a sell signal when the middle line is showing the purple line, in such case, the purple line is moving above the market price, this continues to be in a downtrend market until the market breaks the green line to the top.
The image above is an example of a bearish market as we could see the market to be showing purple lines and the EMA is moving above the market price, this continues until the middle color changes to green which thus confirms a trend reversal as a new trend is likely about to occur.
Trend based indicators have a history of giving fake signals at times which is why they can not be fully dependent on, trend indicator such as the median indicator sometimes can over filter signals which thus cause the indicator to omit unnecessary signals but in trading, all signals matter as any wrong info can lead to a bad trading decision.
The median indicator has the issues of lagging as sometimes we might have seen that the market has gone before the indicator reacts to a market movement which is why we best add other indicators like RSI to ommits a false signal and also gives confirmation to our entry.
The image above shows a fake signal from the trend, as we could see the market to have shown a good recovering as the market is now trending upward, but yet the median is still showing a purple color signally a downtrend market which the same is not the case with the RSI as the market has already moved to bullish recovery some hours ago before the Median indicator eventually picks the trend lately.
For this particular task, I will be making use of the demo account on paper trading to carry out the long and short trade with the help of the median indicator as well combined with the relative strength index indicator to confirm my entry should incase the median indicator should have lagged.
Long Trade - Buy ETHUSD -
For my setup, I added the median indicator combined with the RSI on the ETHUSD market of 5 min frame, then I was able to confirm that the market is showing the green cloud at the middle line, as well, the RSI is above 50 lines.
I took an entry to buy with the risk-reward in 1;1, my stop loss below the support level and my take profit above as well.
My running order of 1000 units of the ETH market is already showing a profit of +$300.
I went back to the chart to see the market movement and I saw that the market is moving exactly how I predicted and my take profit level is about to be reached by now I was now having a profit level of $700 +.
The Take Profit eventually hit at 1000USD.
Short Trade - Sell WAVESUSDT
For my setup, I added the median indicator combined with the RSI on the WAVEUSD market of 1 min frame, then I was able to confirm that the market is showing the purple cloud at the middle line, as well, the RSI is below 40 lines.
I took an entry to Sell with the risk-reward in 1;1, my stop loss above the resistance level, and my take profit below as well.
My running order of 1000 units of the WAVES market is already showing a profit of +$90.
First of all, I want to thank professor @abdu.navi03 for picking such a wonderful course to teach in the academy, especially since the median indicator is one of the best indicators out there and one that will greatly improve one's trading system and when practiced well and combined with good tools too can give one a very profitable trading system.
We should also have in mind that we can not base real investment trading decisions on the median alone as the indicator at times might not be accurate which is why we add other indicators like RSI to confirm our entry.