Basics to trade cryptocurrencies correctly [Part 1] - Steemit Crypto Academy - S6W1 - Homework post for nane15

Hi guys,
I welcome you to season number 6 week number 1 of the steemit crypto academy. It's a pleasure on my part to be here once again to partake in the academy. This week the professor in the person of @nane15 based his lecture on the topic Basics to trade cryptocurrencies correctly [Part 1], and after reading through the interesting lecture, I am going to be attempting the homework task in this blog of mine. Let's get started.

When we talk about the word trading, what comes to our mind is that it involves buying and selling of both goods and services with the main aim of making a profit. Trading works in accordance with the law of demand and supply. In the crypto currency world, traders tends to buy asset when the price is low with the mindset of selling it when the price is high.

As I have stated earlier, the crypto currency trading obeys the law of demand and supply I.e to say the value of the coins reduces when the supply of the coins is much, in a similar way, the value of the coin increases when the demand for the coins is high. As we all know the importance of the law of demand and supply in trading can never be overemphasised as that is the reason why the price of the asset is not stagnant.

Looking at the crypto currency market, we notice that the price continues fluctuating every second and that is a clear indication that there is an interaction between the buyers and the sellers. Morealso, the demand and supply law is playing it self in the market and the liquidity provided by the exchange is such that the asset is made available to the traders to buy or sell at any point in time at their convenience.

Trading cryptocurrency is made easy with the help of exchange platforms. The platform provides all the needed information for traders to buy or sell asset at just a click. In trading, traders may be long term traders or short term traders. Long term traders are those traders that purchase asset at a low price and then believes that in the nearest future the price of the asset will raise so that they will sell it at that time. On the other hand, short term traders and this traders that buy asset and sell it when ever a slight fluctuation is seen in the market. The short term traders tends to make little profit.

There are few analysis that helps traders to make better profit when it comes to trading among which are the technical analysis, fundamental analysis and the sentimental analysis. Let's discuss them in brief below.

Graphs and indicators are normally use for this type of analysis. In trading, we believe that the market is in a circle I.e to say many things repeat themselves so the graph history is used to make prediction of the new movement of the price of the asset. This is mainly use by short term traders who wish to make profit by studying a certain pattern and then applying it when it surfaces again in the crypto chart.

Another important analysis every trader who wishes to be successful has to take into consideration is the fundamental analysis most especially long term traders. This analysis involves the government policy, news on social media, updates as regarding the project in question, whales etc. When these news all come in favour of the coin, there is a very high probability that the price of the asset will raise some day. So traders can purchase these coins and hold and continue waiting for it future because it will surely come.

This type of analysis has to do with human perception. Here a lot of human factor is taking into consideration such as doubt, fear, emotion etc. This analysis has to be done by you as a human person on what you think will be the outcome of the market in the nearest future.

Strong and weak hands in the market is what gave raise to the raise and fall of the price of asset in the crypto currency market. When buyers of the asset start buying I.e they begin to demand for the asset, the price of the asset begins to increase and in the same way, when the sellers of the asset start selling I.e they begin to supply their asset to the market, the price tends to reduce. Let's discuss in details what strong and weak traders are all about in paragraph below.

The strong hands in the market are those who have a very large amount of capital investment in the market. They strong hands include investment funds, hedge funds, banks etc that trade the market with a very high volume of money. Now this types of traders has very high influence on the market such that their presence in the market alone is enough to raise the price of the asset in question. We call these type investors as whales because they can manipulate the price of the crypto asset at any point in time.

The strong hands in the market makes their profit by influencing the market by means of accumulations and distribution. In the phase of accumulation, a lot of fund is put into the market by the whales and that will cause the price of the asset to drop and that will cause a lot of demand to be made for the asset in question. When they have accumulated enough, they then distribute the asset and that will cause the price of the asset to fall again and in so doing they make their profit and opt out of the market because at that point they are removing their money from the market.

The weak hands in the market are investors with little capital investment in the market. This type of investors can be individuals, small organizations etc. Unlike the strong hands, the weak hands do not have impact on the price of the asset as they are not even up to 10% of the entire liquidity. This means that their going out of the trade won't affect the price as it does when strong hands with up to 30%-50% influence on the market does. The weak hands are normally used by the strong hands to make their profit by bringing them into to the market and trapping them.

To me, I think that thinking like a pro is far better than thinking like the pack. Once you begin to think like the pro, then you are certain that your asset is very well secured. We know that prices are manipulated by the strong hands in the market I.e they buy when the price is low and them sell when the price is high. They have the ability to influence the price of the market at any point in time.

To think like a pro entiles you placing a trade when all confirmation has been seen. You don't take a position just because of news circulated by people in the social media as regarding the coins in question. You careful look at the price chart and then confirm your position before taking it. A weak hand can be very successful when he thinks like a pro I.e to say he takes into consideration the technical analysis of the trade and then forget about sentimental analysis because that can cause him his entire capital.

Trend in trading is one of the most important aspect of trading. Trend is talking about the movement of the asset is a given direction within a specific period of time. For a trader to be successful in his/her trade, he/she must understand the trend direction of the asset so that there will be no room for counter trade I.e trading against the trend. From the lecture delivered by the professor,I will be using the Elliot wave pattern to explain trend below. Let's briefly look at trend using this pattern.

The Elliot wave trend pattern is made up of two different wave pattern, namely the impulsive wave pattern and the corrective wave pattern. The impulsive wave pattern is made up of 5 waves and in this waves, waves 1,3 and 5 moves in the trend direction (Impulsive movement) whereas waves 2 and 4 stands as a pullback (Corrective movement) where traders can take their profit. The corrective wave pattern on the other hand is made up of 3 waves I.e a, b and c. Both wave a and c are moving in the trend direction (Impulsive movement) whereas wave b stands as a pullback (corrective movement).

From the screenshot above, the entire rule that governs the Elliot theory has been observed. As we can see clearly, from the first rule which state that wave wave 2 should not retrace to the previous low of wave 1 and that wave 4 should not retrace to the previous low of wave 2 and that has been taken into consideration in the chart. Secondly, the second rule was also observed where the high of wave 3 is higher than the highs of wave 1 and also, the highs of wave 5 is higher than the highs of wave 3. Finally, we have also observed from the chart that the third rule has been observed where wave 3 happens to be the longest among all the waves.

Both the first and the last impulse are important in the Elliot trend pattern as it helps to user traders into a new trend of the market. Below I will be explaining briefly how we can be able to identify both the first and the last impulse waves in a trend.

We have explain previously how to identify trend using the Elliot trend pattern, so to identify the first impulse you have to take into consideration the previous Elliot wave trend pattern and if the trend ends at point 5, then a reversal set in which is observed by points a, b and c. At point a the wave moves above the previous high and then breaks to form point b which will be a lower high and then another move is seen to point c which is higher than the previousus point a. So between point a and c you have your first impulse as you have a clear picture as to the direction of the trend.

From the chart above, the first impulse signify a confirmation in the trend direction of the asset within the chart.

To identify the last impulse, be sure to have gotten the five wave pattern movement after the first impulse was identified. Now when you have done that, the next points of a, b and c which is similar to that of the first impulse wave is taken into consideration. Let's look at the last impulse from the screenshot below.

From the chart above, the last impulse signify a confirmation in the trend extinction of the asset within the chart.

Just as we have explained above, the impulse enable us to know the trend direction of an asset within a period of time. So when we have identify the 5 waves, the impulse point a, b and c confirms the trend direction of the asset hence we can be able to place our order within that point. The pararell line drawn on the chart at the point between a, b and c is the point where our entry should be taken. For bullish trend, the entry can be taken in this manner I.e buy entry should be taken at the point where the parallel line is drawn and the stop loss be place below the entry and the take profit should be taken after the end of the 5 wave point.

In the same way for downtrend, a sell entry can be entered same way after the 5 waves trend pattern within the impulse of a, b and c where the parallel line is drawn. The points a, b and c confirms the trend movement so that you don't loss your asset.

Elliott wave theory as we have seen previously has to do with accumulation of asset by whales and then distribution of the asset to earn profit. Now, before the 5 waves movement, the impulse is noticed which gives us the trend direction before the 5 waves show them selves. This is actually the relationship that takes place in the Elliott wave theory. The accumulation phase, the 5 waves trend movement and lastly the distribution phase.

From the screenshot above, we can see clearly that the three steps continue to repeat their selves as far as Elliott wave pattern is concern. First and foremost we experience accumation, which has to do with the first impulse and secondly we experience a trend movement of the 5 trend wave pattern and lastly we experience distribution which has to do with the last impulse. From this analysis, the weak hand can begin thinking like the pro as the Elliott pattern has expose how the strong hands manipulate thee market to their own favour.

Trading has many ups and downs and only those who think like the pro can be able to succeed when it comes to trading. We have seen how the strong hand manipulates the market and then the weak hands loss most of their asset by the introduction of fake out signals by whales. The only way to become a successful trader is to apply the method explained by the professor in the person of @nane15 in his lecture.

The Elliott wave pattern is a secret weapon which can be used to succeed when trading cryptocurrency because it has expose the way the whales of crypto currency are thinking. Once you as a retail trader begin to think like the pro then you trade will always be very successful. Always make use of technical analysis for better confirmation before you go into any trade.

I want to finally appreciate the professor such an insightful lecture. This is a clear indication that this season is filled with lots of goodies and it is a sign that we will become better crypto currency traders before this season finishes.