Crypto Academy Season 03 - Week 04 | Advanced Course - Trading The Dynamic Support & Resistance

in SteemitCryptoAcademy2 months ago (edited)

As I mentioned in my previous lectures, Steemit Crypto Academy Season 03 is providing an excellent opportunity to new steemians who want to start their journey in Crypto world and advanced steemians who want to take their crypto journey to another level. If you are taking part for the first time in this season, you must check the previous 3 weeks lectures to get some great knowledge.

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Last week, I have explained BRB strategy that is effective to trade the trend continuation after break of important support and resistance levels. This week I am going to share another price action strategy that is called Trading the Dynamic Support and Resistance which will help you to get in trades at start of the new trend and also help you ride the trend. I will explain different aspects of trading dynamic support and resistance and students will be able to understand the following from this lecture;

  • The concept of Dynamic Support and Resistance
  • The Perfect Combination of 50 and 100 EMAs
  • Trade Entry Criteria for trading Dynamic Support and Resistance
  • Trade Exit Criteria for Dynamic Support and Resistance
  • Example of Dynamic Support and Resistance on Crypto Assets

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The concept of Dynamic Support and Resistance

Most of you are aware of the support and resistance concept. These are the levels from where the price might rebound. Generally, these levels are marked as horizontal lines on the charts but sometimes you might have noticed that price is respecting an unseen diagonal level very precisely.

That diagonal level is most commonly referred to as trendline and people like to draw these lines and think it as support or resistance level. Here, I want to share my concept which I called Dynamic Support and Resistance level. I use Exponential Moving Average to ride the trend and it act as dynamic support or resistance level and I will explain it with help of charts.

Example of Dynamic Support on Chart

Have a look at this Litecoin chart on 1hr time frame to understand how Exponential Moving Average (EMA) is acting as dynamic support. You can see that whenever price is reaching the EMA, it is bouncing and moving up again. That is why EMA is called dynamic support because it kept on moving as the price is moving.

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Example of Dynamic Resistance on Chart

Have a look at this Ethereum chart on 15 min time frame to understand how Exponential Moving Average (EMA) is acting as dynamic resistance. You can see that whenever price is reaching the EMA, it is bouncing and moving down again. That is why EMA is called dynamic resistance because it kept on moving as the price is moving.

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The Perfect Combination of 50 and 100 EMAs

Now, you know how Exponential Moving Average acts as dynamic support or resistance, I want to introduce the combination of two EMAs (50 and 100) that I use to maximize trading opportunities keeping them in controlled risk.

We will use one EMA at 50 length setting while we will set the length of second EMA at 100. This will give us 2 separate EMAs on the chart which will help us take better entries and exits.

Let me add both of these EMAs on the charts and you will notice how perfectly price is respecting them. You will also note that the price is not going below 100 EMA significantly and we will use that thing to mark our exit areas that I will explain in next part of the lecture.

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Trade Entry Criteria

I will be explaining the trade entry criteria for both Buy positions and Sell positions. It is important to note that you can only place Buy trades in spot trading available on crypto exchanges. You can also sell crypto assets on margin trading or other platforms like Metatrader4.

Entry Criteria for Buy Position

1- You need to add 50 and 100 Exponential Moving Averages on your chart.

2 - Price should be above both of the EMAs in order to form a valid Buy setup.

3 - Wait for the price to touch or cross 50 EMA but don't just buy on the touch because the price can pierce down both EMAs and not move up again which will make it invalid setup.

4 - For a valid setup, wait for the price to move up again after it has touched or crossed 50 EMA.

5 - As the price leave 50 EMA and move just above it, you can place Buy order.

Note: You will get more than 1 opportunity to get into a trade and if you can get into early trade you can ride the trend as you can see we got two clear entries and the 1st entry would have enjoyed you the ride of trend.

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LTC/USD chart on 15 minute time frame showing Buy Entry Criteria

Entry Criteria for Sell Position

1- You need to add 50 and 100 Exponential Moving Averages on your chart.

2 - Price should be below both of the EMAs in order to form a valid Sell setup.

3 - Wait for the price to touch or cross 50 EMA but don't just sell on the touch because the price can pierce above both EMAs and not move down again which will make it invalid setup.

4 - For a valid setup, wait for the price to move down again after it has touched or crossed 50 EMA.

5 - As the price leave 50 EMA and move just below it, you can place Sell order.

Note: You will get more than 1 opportunity to get into a trade and if you can get into early trade you can ride the trend as you can see we got two clear entries and the 1st entry would have enjoyed you the ride of trend.

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ETH/USD chart on 15 minute time frame showing Sell Entry Criteria

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Trade Exit Criteria

I am explaining the trade exit criteria for both Buy and Sell Positions. You should also set Stop Loss levels and Take Profit levels for both scenarios i.e. Profit or Loss.

Exit Criteria for Buy Position

1 - We should set a Stop Loss Level in case our trade goes in the wrong direction after entry.

2 - This Stop Loss level should be below the 100 Exponential Moving Average (EMA).

3 - If the price crosses the stop loss levels, it means the trade setup is invalidated and we should exit the trade and wait for another setup.

4 - We Should Set Take Profit level in case our trade goes in the desired direction.

5 - Take profit level should be 1:1 RR (Risk:Reward) at least which means it should be equal to our stop loss level.

6 - I will recommend everyone to use 1:1 RR until they get good practice with this strategy.

7 - When price hits your take profit levels, you can book the profits ar exit from trade.

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Exit Criteria for Sell Position

1 - We should set a Stop Loss Level in case our trade goes in the wrong direction after entry.

2 - This Stop Loss level should be above the 100 Exponential Moving Average (EMA).

3 - If the price crosses the stop loss levels, it means the trade setup is invalidated and we should exit the trade and wait for another setup.

4 - We Should Set Take Profit level in case our trade goes in the desired direction.

5 - Take profit level should be 1:1 RR (Risk:Reward) at least which means it should be equal to our stop loss level.

6 - I will recommend everyone to use 1:1 RR until they get good practice with this strategy.

7 - When price hits your take profit levels, you can book the profits ar exit from trade.

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Example of Trading Dynamic Support & Resistance on Crypto Assets

I hope you have understood Trading Dynamic Support and Resistance strategy along with its entry and exit criteria. This is a very simple strategy, especially for intraday and scalping trades. I am showing you some examples on crypto charts where the strategy has worked well.

BNB/USD on 15 Minute Time Frame

You can see how beautifully the dynamic resistance has provided 3 setups on 15 min chart of Binance coin.

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DOTUSD on 15 Minute Time Frame

This Buy position on Polkadot would have made great profits if you entered at the start of the trend. Even if you missed the 1st entry, you could still have made a decent profit on 2nd entry.

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DOGE on 15 Minute Time Frame

Look at this Doge chart and you could have made huge profit if ride this trend by catching 1st entry or even 2nd entry. This is the beauty of this method when you get in the trend early and ride it.

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Final Words

  • The dynamic support and resistance can be marked on charts by applying Exponential Moving Average (EMA)

  • You can get into a trend early and ride it using dynamic support and resistance.

  • There are certain entry criteria that you should monitor before taking trades based on dynamic support and resistance.

  • You should understand the trade exit criteria for both scenarios i.e. profit and loss.

  • You can trade the dynamic support and resistance on any time frame. Shorter time frame will provide you more setups but it needs quick decision making. My personal favorite time frame to trade dynamic support and resistance is 15 minutes.

  • 50 and 100 EMAs are the perfect combination to trade dynamic support and resistance according to my experience but you can always try different combinations that suit your style and temperament.

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Homework Task

1 - What do you understand about the Concept of Dynamic Support and Resistance? Give Chart Examples from Crypto Assets. (Clear Charts Needed)

2 - Make a combination of Two different EMAs other than 50 and 100 and show them on Crypto charts as Support and Resistance. (Clear Charts Needed)

3 - Explain Trade Entry and Exit Criteria for both Buy and Sell Positions using dynamic support and resistance on any Crypto Asset using any time frame of your choice (Clear Charts Needed)

4 - Place 2 demo trades on crypto assets using Dynamic Support and Resistance strategy. You can use lower timeframe for these demo trades (Clear Charts and Actual Trades Needed)

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Rules

  • Your homework post should have at least 300 words. You can write more but I want you to be specific about your answers and do not write super lengthy paragraphs.

  • You must give more importance to make great and clear charts instead of making your task extra lengthy.

  • I want to see your clear understanding of the strategy and not a super lengthy essay.

  • You must post your homework post in SteemitCryptoAcademy Community.

  • Plagiarism of any kind will not be tolerated and result in severe actions against the offenders.

  • Create your own charts and use only copyright-free images/charts with proper reference if you have to use them.

  • You can submit your homework post by 24th July 23:59 UTC. Any post submitted after the deadline will not be entertained.

  • You must include #cryptokraze-s3week4 and #cryptoacademy among the first 5 tags.

  • Members who are doing power down will not be considered for evaluation and grading.

  • To be eligible for participating in Advanced Tasks, you must have 60 reputation and minimum 500 SP.

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Publisher : @cryptokraze
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Sir in question 3 we have to show entry and exit with the pair of EMA which we use in question 2?

You can use 50 and 100 EMA for question no 03 to show entry and exit criteria.

Ok thank you professor

professor I think there is a typing error in sell position.
Entry Criteria for Buy Position
2 - Price should be above both of the EMAs in order to form a valid Buy setup.

Entry Criteria for Sell Position
2 - Price should be below both of the EMAs in order to form a valid Buy setup.

Both statements have Buy.

Ah. Thanks for pointing. It is rectified now

As you all might know it is EID festival here in my country. I will start checking the tasks from tomorrow so you don't need to worry.

Patience is the key in Trading :)

Hey @cryptokraze , i want to participate in the contest with 62 reputation and 229 sp, plz can i , will my entry be valid

❤❤❤
Faith

You need to have 500 SP to be eligible for advanced tasks.

asalamalikum professor @cryptokraze

Thank you for another Amazing lecture.

here is my assignment post

i am new here..any help pls..

It will be checked today. I am checking all remaining tasks today

Greetings professor @cryptokraze grateful with the master class you have given us, below I attach the link of my participation to the activity:

https://steemit.com/hive-108451/@madridbg/crypto-academy-season-03-week-04-or-advanced-course-trading-dynamic-support-and-resistance

I woul like to take this course, please. What can I do ?

power up to 500sp

 2 months ago 

Thanks for the great lecture professor @cryptokraze. I have made an entry and I present the link to it below. Thank you.

https://steemit.com/hive-108451/@fredquantum/crypto-academy-season-3-week-4-homework-post-for-cryptokraze-or-trading-the-dynamic-support-and-resistance

 2 months ago (edited)

I am 100% sure that I have graded all the tasks with correct tag and that were posted within deadline.

May be your tag was wrong at that time.

 2 months ago 

I'm usually intentional about the tag, strange. But if you say you're 100% sure then the fault is probably from my end. Do I need to repost it or should I give it up?

I have checked it and I am sorry to say that there are basic mistakes regarding the support and resistance levels you marked for BRB setups. This makes your task fall under lack of understanding about the strategy.

 2 months ago 

Thanks a lot professor, I appreciate the feedback. I guess jts time for a little more research