Hello Everyone...!!!
I am much grateful to participate in this week homework post for Prof @reddileep. The detailed lesson provided on Highly Profitable Trading Strategy with VuManChu Cipher B was very comprehensive.
All images and screenshots are taken from the TradingView
1- Define VuManChu Cipher B Indicator in your own words.
VuManChu Cipher B Indicator is a unique colourful technical indicator that comprise of several indicators embedded as one of which traders utilize to create a highly profitable trading strategy. It compose of several indicators like the RSI, Money Flow, Market Momentum and Market Volume. This enable trades to combine more than three indicators on a single chart as three is the limit for several chart graph platforms.
The VuManChu Cipher B is a modification of the market cipher B indicator as they have certain similarities and are all Wave trend based indicators. Since the indicator comprise of different indicator it has made its settings very complex to understand but traders can disable some of the indicator to focus more on what they want to achieve. This will make understanding and signal confirmation very easy.
VuManChu Cipher B can be used in trend identification with the wave trends, traders can also get information on money flow in and out of the market with the use of the money flow indicator. This enable traders to identify the demand and supply force to create pressure in the market by correlating with directional movement of price action.
The VuManChu Cipher B indicator as a wave trend indicator is made of two colours, that are, light blue and dark blue, whenever there is a cross between these two colours, a dot is seen which changes from blue to red. The indicator also composed of two different cloud (Money Flow) which are green and red in colours, this determine the amount of money flowing in and out of an asset. When the colour is green, it means that money is flowing into the asset market and vice versa.
2- How to customize the VuManChu Cipher B Indicator according to our requirements? (Screenshots required)
We need to visit any price chart platform that allows the use of indicators to customise the VuManChu Cipher B indicator. I will be using the tradingView platform.
First visit the official website of TradingView to access the chart features. Select any crypto pair of your desire.
At the top part of the window, click on Indicators & Strategies (fx).
.png)
- In the search box, type in the VuManChu Cipher B and click on it from the pop up menu that appear.
.png)
- We can see on our chart that the VuManChu Cipher B indicator has been added successfully.
.png)
In configuring the settings og the VuManChu Cipher B indicator, navigate to the upper left on the chart window containing the indicator and click on Settings.
.png)
Input Tab
From the lesson provided by the professor, we didn’t discuss anything like divergence and so we have to remove some parameter to concentrate on our study. Move down from the menu and Disable the 'Show WT Regular Divergence' and Show 2nd WT Regular Divergences.
.png)
Again move down a little to disable the Show Stochastic RSI which is also not important in this case.
.png)
Style Tab
With the style tab, we can configure certain features like thickness, curve colour, and precision of the VuManChu Cipher B indicator. Certain features too are not important in our study and so we have to disable them to have less clustered indicator. The volume-weighted indicator (VMAP) which calculate and the weight average price of an asset should be disable.
.png)
Also, we have to disable the MFI Bar Colours indicator which configures the volume inflow and volume outflow of an asset with different colours as it is not important in our study.
.png)
Now that we have disable all the unnecessary indicators and feature, we can see the VuManChu Cipher B indicator with less complex features and look easy to understand. The only feature left here is the volume flow and the wave trend line.
.png)
3- Explain the appearance of the VuManChu Cipher B Indicator through screenshots. (You should highlight each important part of this indicator by explaining their purpose)
VuManChu Cipher B indicator like we said already is made of several indicators merged together as one to yield a very profitable trading strategy. So there is the need for us to separately explain the various component that make up the indicator. Below are the description to the various parts of the indicator.
Wave Trend Indicator
This occupied the major space of the indicator window and comprise of two blue lines that oscillate like a pendulum above and below a zero line. The zero line is made of the light blue line and the dark blue line. The crossing over of the two blue lines signal a reversal trend and also determine the leading force of the demand and supply force.
During the crossover of the two line, a green and red dot is seen to appear. The red dot signifies a bearish momentum while the green dot signifies a bullish momentum.
.png)
Money Flow Index Indicator
This is the cloud like feature that appears within the wave trend indicator above and below the zero line, and it highlights the amount of money that flows in and out of an asset market. The money flow index is made of two colours, green and red, of which the green indicates the amount of money flow into an asset while the red indicates the amount of money flow out of the asset market.
.png)
4- Demonstrate your preparation for the Trading Strategy combining other indicators. (Instead of showing the addition of indicators to the chart, you should explain the purpose of each indicator for this trading strategy.)
For a good trading strategy, a trader should always combine several indicators to filter out false signals and generate early trading signals to profit from an asset market. The VuManChu Cipher B indicator should be combine with Exponential Moving Average (EMA) to filter out false signals. To illustrate this, the VuManChu Cipher B indicator is combine with the EMA with varying periods of 55 and 200.
EMA cross over is used to determine buy trade signals and sell trade signals in the market, When the 55 EMA crosses above the 200 EMA it gives a signal for buy trade and show an indication that bulls are taking control of the market. On the other hand, when the 200 EMA cross above the 55 EMA, it gives a signal for sell trade and show an indication that bears are taking control of the market. The combination of the EMA and VuManChu Cipher B gives a perfect much for identifying and confirming signals.
5- Graphically explain how to use VuManChu Cipher B Indicator for Successful Trading. (Screenshots required)
Though the VuManChu Cipher B indicator can be use alone to identify and confirm trend, to avoid certain errors and emission of false signal, I will combine the VuManChu Cipher B indicator with the EMA with varying period of 55 and 200. See illustration for both bullish and bearish markets.
Bullish Market
There are three things we should look out for to confirm our bullish trend with the combine indicators.
The 55 EMA has to cross above the 200 EMA to confirm from the EMA indicator for bullish trend. If this is okay with us, we then move to the VuManChu Cipher B indicator.
With the VuManChu Cipher B indicator, the Money Flow Index (MFI) should emit a green colour which signifies that there is an inflow of money into the asset market.
Again, with the VuManChu Cipher B indicator on the wave trend, the crossover of the light and dark blue lines should highlight a green dot signalling a bullish trend.
When all these three observations are met, it indicates that the demand and supply force is shifted to the demand force and bulls are momentarily taking over the market.
.png)
From the chart above both the EMA and VuManChu Cipher B indicators confirm bullish trend as all the requirements explained above are met. The 55 EMA has cross above the 200 EMA and the MFI emit a green colour, also the wave trend cross indicated a green dot.
Bearish Market
There are three things we should look out for to confirm our bearish trend with the combine indicators.
The 200 EMA has to cross above the 55 EMA to confirm from the EMA indicator for bullish trend. If this is okay with us, we then move to the VuManChu Cipher B indicator.
With the VuManChu Cipher B indicator, the Money Flow Index (MFI) should emit a red colour which signifies that there is an outflow of money from the asset market.
Again, with the VuManChu Cipher B indicator on the wave trend, the crossover of the light and dark blue lines should highlight a red dot signalling a bearish trend.
When all these three observations are met, it indicates that the demand and supply force is shifted to the supply force and bears are momentarily taking over the market.
.png)
From the chart above both the EMA and VuManChu Cipher B indicators confirm bearish trend as all the requirements explained above are met. The 200 EMA has cross above the 55 EMA and the MFI emit a red colour, also the wave trend cross indicated a red dot.
6. Using the knowledge gained from previous lessons, do a better Technical Analysis combining this trading Strategy and make a real buy or sell order in a verified exchange. (You should demonstrate all the relevant details including entry point, exit point, resistance lines, support lines or any other trading pattern)
For the purpose of this task, I will make all my technical analysis on the tradingview chart platform and place the real trade order on my Binance verified account.
Buy Trade ADAUSDT (30MINS)
.png)
As seen on the chart above, following price action Cardano maintained support at the verge of $1.394 serving as an initial resistance. With the EMA indicator, the 55 EMA is above the 200 EMA confirming a bullish trend for market entry.
From the VuManChu Cipher B indicator, bullish trend is confirm as Money Flow Index (MFI) displays a green colour indicating that there is the inflow of money into Cardano at the moment. This shows that there is pressure on the demand force by bulls to outweigh the supply force.
The wave trend indicator confirm bullish trend as the cross between the dark and light blue lines indicated a green dot. This give a clear signal to place a buy order for Cardano.
After all the technical analysis I did on Cardano from trading view, I log into my verified Binance exchange wallet to execute a buy order for Cardano.
From the Binance exchange, the buy trade position was executed at $1.448 with a stop loss $1.394 and a take profit level at $1.489. Upon the proper trading management, a risk to reward of 1:1 with the stop loss level place just below the strong support and our take profit just above our previous high point.
.jpeg)
CONCLUSION
The VuManChu Cipher B was made out of the market cipher B indicator as it share certain similarities. The VuManChu Cipher B comprise of several indicators like the RSI, Market volume and Momentum, Money flow etc. and all these can be disable in the indicator settings to give an understandable view.
In confirming trend we should use the VuManChu Cipher B indicator with several indicators as we did with the EMA with varying periods of 55 and 200, this will filter out false signals and help traders to have a profitable trade.