It is with great pleasure to be a participant in this week assignment of professor @reddileep which he taught about HOW TO TRADE CRYPTOCURRENCIES PROFITABLY USING TD SEQUENTIAL, I can say I understood the class and I have been able to give back base on my own understanding and the research I made. I stand corrected in any way as I might have come short in details of a particular question.
1- Define TD Sequential Indicator in your own words.
The TD Sequential indicator is a technical analysis tool that helps traders to find price moves that go on to become overextended and are set to change their direction, thus enabling traders to take a trend reversal position. It was developed by a technical analyst called Tom Demark. In fact, the TD in front of Sequential is the initials to his name Tom Demark. He designed the indicator to help traders anticipate the turning points in the markets. It is a tool that traders can use to counter trends, and also helps them to perform correctly in during ranging markets.
The TD sequential indicator adds various numbers to the trading chart when the indicator is installed on the trading chart. These numbers are seen above and below the chart indicators, which could be the Japanese candlestick or bars being employed on the chart.
The numbers don't appear in a random manner, instead, they are shown in an ascending order starting from the number 1 and ending at 4, 9, or 13 depending on the readings that the numbers give and the phase at which the indicator is in. The numbers also move in a sequence and the sequence represents the state of the current price trend.
There are two signals that are given when using the TD sequential indicator. The signals are price exhaustion and the expectation that there would be a reversal in the price (or correction). It can be used in any timeframe and in any market condition. It is very effective on higher timeframes such as 4 hours and above. It comprises three phases, the set up (momentum phase), intersection, and the countdown (trend exhaustion phase). It is a leading indicator, and it generates support and resistance levels also known as (TDST lines)
2- Explain the Psychology behind TD Sequential. (Screenshots required)
The psychology behind the sequential indicator is usually related to the rules or requirements that are needed when trading with the indicator. When using the indicator, there are usually three phases that are associated with it. They are the:
- Set-Up (Momentum Phase)
- Intersection
- Countdown (Trend Exhaustion Phase)
In this exercise, I will be using the Setup phase to explain the psychology behind the trading indicator.
The TD indicator makes use of the Japanese candlestick chart pattern to help analyze the chart because the patterns formed by the Japanese candlestick show the behavior of the market price. With the combination of the patterns formed and the TD indicator, we can find trend reversals. We count the numbers on the TD sequential indicator that is placed above or below the candlesticks. These numbers give an indication of a Sell Set Up or a Buy Set Up.
Buy Set Up
For instance, we have a Bearish Trend, therefore the price of the asset is going down and it is indicated by the candlestick pattern as the candlesticks close lower than the previous candlesticks. Then the TD sequential numbers also show numbers 1 to 9. The Bullish Signal is shown when the TD sequential indicator shows the number, 9. This means that the movement of the candlestick has closed 9 consecutive (sequential) candlesticks where each candlestick closed lower than 4 candlesticks before it.
The image above confirms this analogy. As the prices went down, the TD indicator counted up to 9, after which there was a change in the direction of the trend. The signal is usually stronger when the lows of numbers 8 & 9 candlesticks are lower than the lows of numbers 6 & 7 candlesticks. When this situation occurs in the market there is most likely to be a change in the bearish trend to a bullish one and the strength of the trend is usually seen in the first four candlesticks that come after candlestick number 9.
Sell Set Up
Then in a Bullish Trend, the price of the asset is going up and is indicated by the candlestick pattern as the candlesticks close higher than the previous candlesticks. Then the TD sequential numbers also show numbers 1 to 9. The Bearish Signal is shown when the TD sequential indicator shows the number 9. This means that the movement of the candlestick has closed 9 consecutive (sequential) candlesticks where each candlestick closed higher than 4 candlesticks before it.
Again, the image above confirms this analogy. When the prices went up, the TD indicator counted up to 9, after which there was a change in the direction of the trend. The signal is usually stronger when the highs of numbers 8 & 9 candlesticks are higher than the highs of numbers 6 & 7 candlesticks. When this situation occurs in the market there is most likely to be a change in the bullish trend to a bearish one and the strength of the trend is usually seen in the first four candlesticks that come after candlestick number 9.
3- Explain the TD Setup during a bullish and a bearish market. (Screenshots required)
TD Setup in Bearish Market
During a TD setup that occurs in a bearish market, the market must have gone through an uptrend or a least a bullish candlestick must have formed. This shows an indication that the price has changed and the numbering begins to count. Also if during the count a candlestick closes higher than the candlestick 4 periods ago, it begins to count starting from number 1.
Then the number starts counting from 1 when the close of the candlestick is below the close of the candlestick four candlesticks previously. This sequence continues until the number reaches 9. At the point of numbers 8 and 9 candlesticks, we can say that the market is overextended. That is, the market has moved in one direction for a while therefore a correction or a market reversal is about to occur.
TD Setup in Bullish Market
Before a TD setup occurs in a bullish market, the market must have gone through a downtrend or at least a bearish candlestick must have formed. This is when we find a price flip and also begin to count. Also if during the count a candlestick closes lower than the candlestick 4 periods ago, it begins to count starting from number 1.
Then the number starts counting from 1 when the close of the candlestick is above the close of the candlestick four candlesticks previously. This sequence continues until the numbers reach 9. At the point of numbers 8 and 9 candlesticks, we can say that the market is overextended. That is, the market has moved in one direction for a while therefore a correction or a market reversal is about to occur.
4- Graphically explain how to identify a trend reversal using TD Sequential Indicator in a chart. (Screenshots required)
Using the TD sequential indicator, a change in trend or trend reversal usually occurs when the numbers on the candlesticks reach 9 during the setup. Once number 9 has been reached, it is most likely that the direction of the trend would change.
Bearish Trend Reversal
For a bearish trend reversal to occur, the numbers on the candlesticks must have reached 9 before a change in the direction of the trend occurs.
The image above shows an illustration of this. The market moved in a downtrend and as it happened the numbers on the candlestick also reached 9. At that point, it was expected that trend reversal was about to occur as the trend had been overextended. After number 9 the direction of the trend changed.
Bullish Trend Reversal
For a bullish trend reversal to occur, the number on the candlesticks must have reached 9 before a change in the direction of the trend can occur.
The image above shows an illustration of this. The market moved in an uptrend and as it did, the numbers on the candlestick also reached 9. At that point, it was expected that a trend reversal was about to occur as the trend had been overextended. After number 9 the direction of the trend changed to the opposite direction.
5- Using the knowledge gained from previous lessons, do a better Technical Analysis combining TD Sequential Indicator and make a real purchase of a coin at a point in which TD 9 or 8 count occurs. Then sell it before the next resistance line. (You should demonstrate all the relevant details including entry point, exit point, resistance lines, support lines or any other trading pattern such as Double bottom, Falling wedge and Inverse Head and Shoulders patterns.)
For this exercise, I used a combination of Tradingview and Binance. Tradingview was used to do the analysis, while Binance was used to execute the trade.
Above is a 4 Hour chart of the BTCUSDT pair on tradingview. It has the TD sequential indicator and Relative Strength Indicator RSI installed on it.
The TD sequential indicator had numbered from 1 to 8 on the respective candlesticks. This gave a buy setup in a bearish market. Then on the RSI, the indicator showed that it had reached its oversold condition, thus signaling a time for the asset to be bought.
The two indicators show that the current bearish market is set to expire and a new bullish market is set to start. So I made a purchase with a stop-loss and resistance level in mind. The market entry price was at $58871.41. I placed my stop-loss below the number 8, this is to ensure that in case of any high volatility due to high selling pressures, I can be able to withstand the pressure. Then I set my resistance at the high of the market.
After making my analysis I went to Binance to make the purchase. I placed a Market order for this trade. I bought 11 USDT worth of BTC. It gave me 0.0001868 BTC. Although, I had some BTC previously, so it totaled 0.00027988 BTC.
This is the trade history. It shows the details of the trade, essentially it shows that the trade was filled.
Conclusion
The TD Sequential indicator is a unique indicator. It helps traders to know the time when a trend has been overextended or exhausted thus leading to a change in direction. That means that the Indicator is a leading indicator because it leads traders to what is about to occur. It was developed by Tom Demark who is considered to be a bright mind, a legend, and an innovator of many trading indicators that are useful for traders.
The TD Sequential indicator is one of the few indicators that can be used as a standalone indicator, depending on the trading skills of the trader employing the indicator. However, as with all trading indicators and strategies, it's best to combine them with another suitable indicator.
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