Trading Using Rectangular Pattern - Steemit Crypto Academy - S5W4 - Homework Post for @sachin08

5개월 전

I am happy we are in the week 4 of the season 5 and without taking much of our time in the introduction of this homework post. I am @sciencetech and this is my homework post for @sachin08

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designed with photoshop

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1. Explain Rectangle Pattern in your own word.

A rectangle is when two parallel, vertical lines intersect two horizontal lines. The so formed rectangle is used in traditional but also in the crypto asset market when the price bounces against resistance and support levels.
The zigzag pattern means that crypto buyers and sellers lose control of the asset's price to sometimes violent swings. When prices intersect the top and bottom trendlines, buying and selling activity becomes even more sporadic.

The lack of change in the price of cryptos between buyers and sellers is due to the distribution of sellers who are mainly matched with less aggressive or passive buyers. When the resistance line is broken, it shows that buyers have more power over sellers, leading to the market shifting to the will of buyers.

When the price of a crypto asset is seen to be moving upward, and is escaping from control from those looking to sell it, the price will now stay at or near its previous value during this upward momentum. The opposite can also happen when the seller has control over the market. In this example, the support line is violated, which points to a downward incline as reserves are depleted. Up until that line was crossed, the price seemed to be going up.

Actually, rectangular patterns are just price of crypto assets in the ranging phase. To understand this, think of passing a wire through a pipe. When the wire is freed, it bounces up and down alongside the wall before moving entirely into the pipe. This is true with any crypto asset that trades in this way.

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2. How to identify Rectangles. Explain with Screenshots.

Rectangular patterns on price charts can be identified by taking into consideration the bearish movement and bullish movement formed before the beginning of the rectangle. The bullish movement is form when a peak in prices occurs before the beginning of the rectangle, and the bearish movement is when a low in prices is seen at the start of the rectangle. Rectangles do not have borders drawn on them until both highs and lows that encompass it are met.

It is essential that the resistance and support lines touch at least two or more of the tops and bottoms of the price movement candles on your crypto asset's chart. When this occurs, it shows you how powerful buyers are in terms of buying power, while influences in the price means an increase on its downward slope on the resistance line (buyers wear out), while compliance on the downside signals relief to sellers (buyers are exhausted).

The image below will explain better

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3. Can we use indicators with this pattern to get accurate results? Explain with Screenshots.

Analyzing rectangular patterns with indicators could help predicate the current state of a crypto asset based off past trends and future prices. Rectangular patterns combined with indicators can provide accurate predictions to what may come and even what can be done for said crypto assets.

I analyzed the market trend of crypto assets with rectangular patterns and added an indicator (the moving average indicator) to the price chart in case this would provide me with an accurate picture of the asset’s trend.

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A 50 and 200 day moving average are embedded into the price chart of the crypto asset to signify market reversal. The presence of a short moving average that is above a long moving average, as seen in the chart, signifies an indication of a death cross that will likely lead to a fall in the price of an asset.

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4. Explain Rectangle Tops and Rectangle Bottoms in your own words with Screenshots of both patterns.

Rectangles on crypto price charts can indicate crypto prices are about to change directions. Trade signals like flags aid us in locating the tops and bottoms of these rectangles giving us advance notice of where further movement of the price may be headed.

forming a rectangle top on a chart means that there was an initial bullish trend that pierced through the rectangle and formed the zigzag in the rectangle. after which continues in a bullish movement this type of rectangle is called a rectangle top. see image below

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rectangle top

forming a rectangle bottom on a chart means that there was an initial bearish trend that pierced through the rectangle and formed the zigzag in the rectangle. after which continues in a bearish movement this type of rectangle is called a rectangle bottom. see image below

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5. Show full trade setup using this pattern for both trends. ( Entry Point, Take Profit, Stop Loss, Breakout)

BUY SETUP

  • As soon as you identify the former price movement and you have seen that there is a current range in the market draw your rectangle

  • place your stop loss and take profit at a 1:3 or 1: 2 to make more profit then place your trade

  • below is an example on the BTC/USDT chart

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SELL SETUP

  • As soon as you identify the former price movement in a bearish direction and you have seen that there is a current range in the market draw your rectangle

  • place your stop loss and take profit at a 1:1 RRR to be on the safe side

  • below is an example on the BTC/USDT chart

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CONCLUSION
It was an amazing lecture and I am glad I was part of it. honestly finding the rectangles gave me a tough time but I am glad that I scaled through.

The professor delivered his second lecture excellently well and I hope I have written to the best of my understanding as I can now carry out trades using the rectangular pattern

Image reference tradingview
cc
@sachin08

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