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Greeting Everyone,
Welcome to my homework post for the season 5, 3rd week. From the knowledgeable course provided by professor @lenonmc21, I have learned a trading technique that is known as Perfect Entry. I have successfully learned how to open positions and take profit through this strategy which will not only help me but, overall, this community to trade in profit. There are some questions that need to be answered and I have done my part with great interest. I hope you guys enjoys it.
Theory
1. State in your own words what you understand about the Perfect Entry Strategy (Place at least 2 examples on crypto assets)?
1. State in your own words what you understand about the Perfect Entry Strategy (Place at least 2 examples on crypto assets)?
There are several techniques to trade in the financial market, but the most preferred method is to make use of technical indicators, which helps us to predict the price of an asset based on past data. The perfect entry strategy can be considered as one of the most effective and accurate techniques as it signals the best entry point with the confluence of renowned indicators and price action like 200 simple moving average, stochastic oscillator, candlestick patterns and the market structure.
The first thing that we have to do is understand the market structure, whether it is bullish or bearish. We can simply draw a series of highs when it is in an uptrend and lows if it is a downtrend. That’s not enough to find the perfect entry signal as we also have to leverage 200 simple moving average. The primary purpose of this indicator is to work as a support and resistance. Plus, it also tells us about the market trend because if the price is above 200 MA, then it will be considered bullish and bearish if it is below the 200 MA line.
The last indicator that we will use is a stochastic oscillator which tells us about the overbought and oversold level of any asset. It actually shows the area where the price has the potential to flip. Further, we will also be observing candlesticks patterns. Thus, with the help of 2 indicators and price action, we can find the best entry point.
I have attached a screenshot of DENT/USDT, and you can observe that the price was making high-high and higher-low, which means that it is in an uptrend. Further, the price flipped 200 MA, which means that it is officially bullish. You can also see that I have highlighted the candles where it retested the 200 MA and made a small candle with a wick on both sides and the stochastic oscillator was also in the oversold level. Therefore, it indicates a bullish move, and you can see that price also started a strong uptrend.
Now take a look at the BAND/USDT chart. Observe the market structure, and you will find that it is making a series of lower high and lower low while the price is below 200 MA, which adds more confluence to the downtrend. Another thing that we have to observe is the stochastic oscillator, and it is in an overbought level as highlighted. Additionally, the price formed a small body candle with wicks on both sides. Overall, it was giving a signal to open a short position, and you can see that price started a strong bearish trend.
2. Explain in your own words what candlestick pattern we should expect to execute a market entry using the Perfect Entry Strategy.
2. Explain in your own words what candlestick pattern we should expect to execute a market entry using the Perfect Entry Strategy.
According to the professor, we have to look for such candlesticks that have a small body and wicks to each side as it shows that there’s no pressure on the price of an asset. These types of candles should be near the 200 MA, and if all these criteria are matched, then it will be our trigger candle. Some of the names of candles that we must look out for are doji, spinning top, morning star, and evening star.
3. Explain the trading entry and exit criteria for buy and sell positions in any cryptocurrency of your choice (Share your own screenshots)
3. Explain the trading entry and exit criteria for buy and sell positions in any cryptocurrency of your choice (Share your own screenshots)
The perfect entry strategy can be profitable if the criteria for the buy and sell are considered thoroughly. If anything is neglected, it can result in loss, so it is essential to follow the below-mentioned criteria:
Criteria For Long Position
The most important thing while opening a long position is to identify the trend via market structure and 200 MA, check if the stochastic oscillator is in oversold level, and the candle is near the MA line while the body is small. Once all these elements are covered, it is time to enter the trade, but managing risk is the main part of the game so stop loss should be placed below the small candle wick, and profit can be booked once the oscillator reaches the overbought level or according to the market behavior.
My trade of VET/USDT simply shows that everything is valid, from the market structure to the stochastic oscillator. Plus, my trade is very well managed because I opted for the RR of 1:4.
Criteria For Short Position
The criteria to open a short position using a perfect entry strategy is pretty much the same as you have to verify the bearish trend through 200 MA and market structure, check if the stochastic oscillator is at an overbought level, and the small candle is formed. Once all these things are done, you can open a short position with stop loss above the small candlewick and preferred take profit area.
In my below-mentioned trade setup, you can observe that the technicals are strong, and I have placed stop loss right above the trigger candlewick and booked profit once the stochastic reached oversold level.
Practice
4. Trade 2 demo account trades using the “Perfect Entry” strategy for both a “Bullish” and “Bearish” scenario. Please use a shorter period of time to execute your entries. Important you must run your entries in a demo account to be properly evaluated.
4. Trade 2 demo account trades using the “Perfect Entry” strategy for both a “Bullish” and “Bearish” scenario. Please use a shorter period of time to execute your entries. Important you must run your entries in a demo account to be properly evaluated.
Now that I have learned about the required criteria for the Perfect Entry, I will test my skills by opening bullish and bearish trades through a demo account. So, let’s see how it goes.
Bullish Demo Trade
I opened the chat of SC/USDT and found that it was in an uptrend while the price was also above the 200 MA. The next thing I did was check the stochastic oscillator, and it was at the oversold level, and the last criteria were to check the smallest candle near the MA that will be our trigger zone. An exact bearish candle was formed. So, after considering everything, I entered the trade and opened a long position with a stop loss below 200 MA.
However, you can see that price went up my TP making my trade valid.
Bearish Demo Trade
By observing the SHIB/USDT chart, I found the market was in a downtrend and below the 200 MA, stochastic oscillator was in an oversold level, and a small candle was formed around the MA. So, I opened short position and placed stop loss above the trigger candlewick and closed my trade when the oscillator touched the overbought level. Thus, my trade was valid because I considered every essential criteria.
Conclusion
The conclusion of my homework is that out of many trading strategies, Perfect entry strategy can be very advantageous for traders as it takes confluence from some of the best indicators and price action, due to which it provides strong signals that have the potential to hit the target price easily.
Thanks For Visiting My Post And Your Appreciation
Cc:
@lenonmc21
