This is Season 3 Week 2 of Steemit Crypto Academy and I'm writing Homework Task for Professor @cryptokraze
1)
What do you understand about Market Structure?
According to what I understood, market structure is a visual representation of how the market operates. It graphically represents price movements in a particular direction in the form of peaks and lows. Traders use these market structures to know about the price movements of an asset to capitalize on it.
While looking at the market structure you will notice wave-like movement created when the buyers and sellers interact and different price points are created. The activity of the buyers and the sellers create areas of resistance and support which are indicated on the market structure.
Different market structures are used to represent the three different types of price movements. These are:
- upwards (uptrend)
- downward(downtrend)
- sideways (consolidation)
The upwards/uptrends:
these market structures represent higher lows and higher highs of the market. Since the price movements visually move as a wave so an uptrend is the demarcation of the continuous highs and lows.
The downwards/downtrends:
A downtrend market structure is used to represent the price movement which is moving downwards. In short it represents the lower highs and the lower lows of the price movement.
The sideways/ consolidation:
When the price range is defined the price movement within that range is represented by the sideward market structure. This structure is used when the price breaks out of the balance.
2)
What do you understand about Lower High and Higher Low? Give Chart Examples from Crypto Assets.
As we discussed earlier on a graph the price of any assets seems to be moving like in a wave. It is important to understand that as it moves it forms distinctive points in its path. These are termed as higher lows, higher highs, lower highs, and lower lows. These terms often confuse the new traders. I will try to explain them in a way that it becomes simpler for everyone to understand.
Lower High:
It can be indicated in a downtrend market structure. When the price of an asset is moving downwards in general this point can be seen when the current high is lower than the last high or the previous high. If a lower high comes at the top of an uptrend it is generally an indication that the price will be moving downwards from that point on.
Higher low:
A higher low is indicated in the uptrend market structure. It is used to represent a higher low in the market movement. To make it simpler a higher low used to represent a low in the market that is higher than the previous low. Below I have shared a screenshot for simpler understanding and an image of the chart for better clearance.
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3)
How will you identify Trend Reversal early using Market Structure Break? (Screenshots Needed)
A break in the market is an indication of the shift of the market towards the opposite direction. For example if the market was up trending previously after a break it will start moving downwards. It indicates a shift from buyers to sellers or vice versa. This d=shift is often termed as the market reversal. You can identify an early trend reversal from highs and lows.
Early trend reversal in an uptrend:
When there is a break at the end of an uptrend it means that the market will be moving downwards from that point. It can be identified by the formation of a lower high, or a lower low at the top of the up trending wave. I will try to explain it through a chart. For beginners it is always recommended to draw or assume a market neckline as a reference point. When the market crosses the neckline and goes below it an early downtrend is confirmed.
Early trend reversal in downward trend:
It is indicated by a higher high or a higher low at the bottom of a downtrend. The market moves higher from that point.
4)
Explain Trade Entry and Exit Criteria on any Crypto Asset using any time frame of your choice (Screenshots Needed)
Where the market break strategy can be a very useful tool in anticipating where the market is heading it has a set of rules that must be followed in order to avoid wrong engagements or false signals. These rules must be followed for taking entry into the market with MSB strategy.
Buy Entry Criteria:
One should see for the following criteria before taking an entry into the market.
- The market should be in the downtrend in any of the time frames you are using. Most of the traders trade in the 15 minutes time frame. I mostly use this or the 1 hour time frame. The down trending market will consist of the lower lows and lower highs.
- The wave should form a prominent higher low after a number of lower lows (In other words a bullish candle close to the previous lower high should be formed. This indicates the breakage of the previously formed resistance.)
- The higher low should be marked as the neckline as a reference that needs to be crossed
- Wait until a bullish candle is formed that clearly surpasses the neckline
- This is a break or shift in the market structure
- Place your bid just above the price of the market break
Sell Entry criteria:
- The market should be an uptrend in your selected time frame consisting of higher highs and higher lows.
- You should see a lower high after a series of higher highs.
- The lower high should be marked as a neckline
- When a bearish candle remarkably moves below the neckline this a downward break in the market
- Place a sell order according to the price at this point.
Trade Exit criteria:
We will have to exit the trade if the trade signal we took as a shift was wrong or our stop limit is hit. In either of the two ways it is important to exit the market for two reasons
- To not loss what gained in greed
- To not increase the loss made
Exit when in loss
- Set stop-loss limits
- The stop loss limit must be above the Lower High Point in case of selling the asset and must be below the Higher Low Point in case of Buying the asset.
- These levels should be placed before starting the trade.
- When trade crosses these limits just exit it and wait for the next desired situation.
Exit when in profit
- Set your desired profit limit based on your technical analysis
- These limits should preferably be set as 1:1 risk reward ratio
- When the market hits these limits just book the profit and exit from the trade.
5)
Place 2 demo trades on crypto assets using Market Structure Break Strategy. You can use lower timeframe for these demo trades (Screenshots Needed)
I will be placing two demo trades on BTUSDT and then on Ethereum
On Bitcoin
When I opened the 30 minutes time frame the market of Bitcoin was in an up-trend. I waited for some higher highs and higher lows to be formed. I set a neckline when I saw a lower high. When there was a clear downtrend I placed the sell order.
On the Ethereum
When I entered the market was in the downtrend. I waited for until I could see prominent higher lows. I marked the latest higher low as the neckline. When the market crossed the neck line I placed the buy order.
Conclusion
The market break strategy is a very useful strategy for traders as it helps them make a right trading move. The starting points of any market break should be identified to enter and exit the trade at the right time to maximize the gains and minimize the losses. The above mentioned criteria should be kept in mind to avoid troubles during trading. The lecture overall was very helpful. It helped me refresh some old concepts and taught some new very important things.