Steemit Crypto Academy Season 5 Week 3 [Beginner's Course] - Understanding Trends II

Source

a) Explain your Understanding of Trend Reversal. What is the benefit of identifying reversal patterns in the Market?
b) How can a fake reversal signal be avoided in the market? (Screenshot needed).
Give a detailed explanation on the following Trend reversal identification and back up your explanation using the original chart. Do this for both bullish and bearish trends (Screenshots required).
a) Break of market structure.
b) Break of Trendline.
c) Divergence
d) Double top and Double bottom
place a demo trade using any crypto trading platform and enter a buy or sell position using any of the above mentioned trend reversal/continuation pattern.

a) Explain your Understanding of Trend Reversal. What is the benefit of identifying reversal patterns in the Market?
b) How can a fake reversal signal be avoided in the market? (Screenshot needed).

a) Explain your Understanding of Trend Reversal.

Source
Trend reversal cam be termed as a movement of a price action contrary to its initial direction i.e if a price is moving in an upward trend or direction and experiences a sudden or slow change in direction to a downtrend and vice versa this is seen to be termed trend reversal

Identifying trend reversal help a trader know when to

ENTER/EXIT ORDERS

Traders often ride trends in the market to take profit, identifying a trend reversal in an asset helps one to know when to exit am open order so he doesn't loose his profit, also identifying trend reversal can tell a trader when to exit his current order and create or enter a new order in order to ride the reversal and make profit

MINIMIZE LOSS/ MAXIMIZE PROFIT

By clearly understanding the concept of trend reversal every trader currently riding a trend with out a take profit or stop loss limit are often on a look out for trend reversal so that they can exit or enter trade, by identifying trend reversal areas one can mimize loss by a lot and maximize profit

Identifying trend reversal help a trader know when to

ENTER/EXIT ORDERS

Traders often ride trends in the market to take profit, identifying a trend reversal in an asset helps one to know when to exit am open order so he doesn't loose his profit, also identifying trend reversal can tell a trader when to exit his current order and create or enter a new order in order to ride the reversal and make profit

MINIMIZE LOSS/ MAXIMIZE PROFIT

By clearly understanding the concept of trend reversal every trader currently riding a trend with out a take profit or stop loss limit are often on a look out for trend reversal so that they can exit or enter trade, by identifying trend reversal areas one can mimize loss by a lot and maximize profit

How can a fake reversal signal be avoided in the market ?

• PROPER ANALYSIS

The easiest way to avoid being dragged into any form of loss or fake signal in the cryptocurrency world is with very solid analysis whether technical or fundamental analysis.
With technical analysis one can analyse a market and possibly predict future market movement while with fundamental analysis one can tell from news or articles if an event is going to cause a pump or dump on an assets value. If one do his fundamental and technical analysis he is less likely to get trapped by fake signals

• MULTIPLE INDICATOR CONFIRMATION

Understanding how indicators work and how they are calculated is not just enough how to properly apply am indicator to spot a trend reversal or close a trade is very important,how to properly apply indicator like RSI and EMA to spot trend and confirm trend, with proper application of indicator and the right combination one can aver getting stuck in fake signals

Give a detailed explanation on the following Trend reversal identification and back up your explanation using the original chart. Do this for both bullish and bearish trends (Screenshots required).
a) Break of market structure.
b) Break of Trendline.
c) Divergence
d) Double top and Double bottom

• BREAK OF MARKET STRUCTURE

A break in market structure often occurs during persistent bullish or bearish trends, a break in market structure occurs when market makes moves breaking past previous higher highs and higher lows in an uptrend or by breaking previous higher low and lower lows in a bearish trend. Pictorial representation of brake in market structure below.

• BREAK OF TREND LINE

A trend line is a technical analysis tool used by traders to to locate multiple lows or highs with the line drawn into the future price action in anticipation that the price will react with the trend line as it did in the previous price movements, the price would of course either act around the trend line or break through

A break of trend line is seen when a price action does not move in anticipation with the trend line and creates new higher highs for a downtrend trend line or new lower lows for an uptrend trend line. Basically a break in trend line is seen when a price action moves past or beyond a trend line. A pictoral representation for an uptrend break of Trend line and downtrend is seen below. Clearly the trend line served as a good support for a while until the break occured

• DIVERGENCE

Divergence is a concept in trading that is seen when there is a difference in movement of price action and in the indicator, a typical example is when a price action is in an obvious uptrend while the indicator is displaying a downtrend, an asset might be makin higher highs in the chart while the indicator is displaying that the asset is making higher low and vice versa.
Basically divergence is a conflict between indicator and price action and this can be used to a traders advantage spotting a trend reversal after divergence can be very profitable to a trader. Pictorial representation of divergence below

• DOUBLE TOP AND DOUBLE BOTTOMS

A double top and bottom are reversal pattern that are formed in a chart after an extended price movements either in the bullish direction or bearish, A double top can be said to be a bearish reversal pattern that is formed in the chart after an extended bullish movement, the pattern is formed beaneth a resistance level or above a support level regageded to as the neck line. The pattern can be perceived when a price action makes a movement after a strong trend to form it's first top or bottom and then moves back to its neckline (support or resistance level) after which it bounces back to form it's second top or bottom and this pattern is only completed after a price hits it's second neckline before a trend break out in neckline then a trend reversal is seen.
The double tops and double bottom are perceived by traders as a trend reversal technique which can be used to spot possible trade entries and exits, although spotting the double top and bottom does not 100% guarantee a reversal in trend.

Double bottom

Double top

ALL SCREENSHOT USED IN THIS QUESTION IS FROM TRADINGVIEW

Place a demo trade using any crypto trading platform and enter a buy or sell position using any of the above mentioned trend reversal/continuation pattern.

For the purpose of this question i will be setting up my demo trade on Tradingview using the paper trading demo account. I will be setting up a take profit and stop loss ratio of 2:1 on the BTC to USDT pair with the trend line pattern.
The trend line I constructed on my chart had multiple reactions with the price action and served as a good support level for a while until the price broke through the trend line and i kept adjusting my stop loss ratio to accommodate the profit intake pictoral detail below

All screenshots in this answer were gotten from

CONCLUSION

The trend reversal patterns are quite easy and straight forward but with proper utilization we can see how effective they are from the trades we have taken,if managed properly they can help a trader minimize loss by a lot and free one from risk of liquidation in an open order in the crypto market. Special thanks to professor @reminiscence01 for this explicit course