Crypto Academy / Season 4 / Week 1 - Homework Post for [@allbert]: Trading with Strong, Weak and Gap Levels
Support and Resistance are one of the most important keys in Trading, if traders properly concentrate at this level then they get multiple chances for a successful trade, but still indications, patterns are not always 100% accurate so day trader perform their daily trade with 1:2 or 2:3 or 3:4 ratio but not more than that. The holder traders can monitor their trade but make sure that capital does not go in minus more than 20% of the investment if it goes then you will recheck the charts and indicators to take the correct decision at right time.
The gap in a price is also important because it helps to take a quick trade but we have to be very fast while trading in a Gaps.
In order to provide information in a sequence, I have changed the place for Question 4 to the place of 2.
| Question 1: Graphically, explain the difference between Weak and Strong Levels. Explain what happens in the market for these differences to occur. |
Weak Support - Resistance Level.
During the live market when the assets price bounce back from a particular price level which we can also say a temporary reversal, but did not sustain more in the reversal and again come back to the same level from where it bounced back at first, here price again try for a bounce back but did not handle more and then quickly come down again at the same level, this can be its 2nd time or the 3rd time, here we can say that the Support level is getting Weak and then due to selling pressure more than buying the price break the Support level which identified Weak Support Level.
Similarly for Resistance, During the live market when the assets price bounce back down from a particular price level, but did not sustain more in the reversal and again come back to the same level from where it bounced back at first, here price again try for a bounce back but did not handle more and then quickly come down again at the same level, this can be its 2nd time or the 3rd time, here we can say that the Resistance level is getting Weak and then due to buying pressure more than selling the price break the Resistance level which identified Weak Resistance Level.
What Happens In The Market During Weak Support - Resistance Level Occurs?
When Weak Support or Resistance occurs in the market as said above the price break the level due to high selling/buying pressure, the possibility that a big down or up candle will represent which mean a big fall/up can be possible here because once the price support/resistance level breaks accordingly new buyer/seller gets added which push price at same direction due to which market trend or market price will go at one side badly, for Support Weak it will go down the side and when resistance it weak it will go up side.
Graphical Representation of Weak Support Level and what happens when it occurs?
According to the above image, we will understand how the market moves and the Weak Support Level.
We can see the market is slightly at the downtrend as the above Blue line is representing the same.
Bounce Back: It is a level from where the price of assets tried for reversal temporarily.
Support Level: After the first bounce back, this is the level where the price of assets comes back again to the Bounce Back Level. Again tried for a reversal trend.
Weak Support Level: After the bounce back and Support Level when reversal trend did not happen, and again assets price come back to the Bounce back level, here we can see the support level has broken which mean the buyer unable to hold the level and due to selling pressure the Support become weak, further we see the price goes down.
Now similar to the Weak Support Level, let's understand the Weak Resistance Level.
Bounce Back: It is a level from where the price of assets tried for reversal temporarily.
Resistance Level: After the first bounce back, this is the level where the price of assets comes back again to the Bounce Back Level. Again tried for a reversal trend.
Weak Resistance Level: After the bounce back and Resistance Level when reversal trend did not happen, and again assets price come back to the Bounce back level, here we can see the Resistance level has broken which mean the Seller unable to hold the resistance level and due to buying pressure the Resistance become weak, further we see the price goes up.
Strong Support - Resistance Level.
Quite opposite but similar to the weak levels, during the live market and trend in down, when the asset price trying to touch a particular level multiple times and bounce back for reversal, due to multiple attempts at the same level the level become strong for Support OR Resistance which mean buyer at support is trying hard try to push the price up multiple time and make level Strong Support Level, it is hard to price to go down, further due to Strong Support Level the buyers push the price to upside.
Similarly, the seller tries hard at the resistance level to push the price down, then after multiple attempts, the seller makes level Strong Resistance Level, and further seller pushes the price at the downside.
What Happens In The Market During Strong Support - Resistance Level Occurs?
At the time when levels are occurring for strong support or resistance, the market price behaves sidewise for some duration, and during this time the levels are becoming stronger. After successful Strong Support - Resistance Level the price will get pushed one side either up or down, if goes up then we can Strong Support Level and when the price goes down we can say Strong Resistance Level.
Graphical Representation of Strong Support-Resistance Level and what happens when it occurs?
As per the above image, we can clearly see that the prices touch 4 times at the support level drawn by a blue line, after 3rd and 4th attempt the level become stronger, further the price push up side from Strong Support Level.
As per the above image, the think blue line shows the price touches multiple times but from the same level, it came down, here I have also used the Parallel tool to show how the price behaves side-wise for some duration when strong levels are appearing.
Further, we can see after a couple of attempts at resistance level but did not cross it, here seller got power and move price to the downside, We can see how the price goes down speedily after Strong Resistance Level.
Continue on the same topic I will take Question number 4 to explain how we can trade buy-sell at Strong Levels.
| Question 4: Through a Demo account, perform the (buy/sell) through Strong Supports and resistances. Explain the procedure (Required Screenshots). |
Buy/Sell At Strong Resistance Level.
Same as per the previous screenshot, when price did not cross to the resistance level and coming down, then when it breaks the support level after broken it is the level for the seller for enter with their sell trade, at the same time who has already brought can exit at here.
The seller can also take their position at the resistance level.
After entering the trade, you can expect 10% profit but then you have to think twice whether continue with the same trade or be good to exit with 10% profit.
Buy/Sell At Strong Support Level.
Same as per the previous screenshot, when we see that the price did not cross to the support level and trying to go up, then the buyer can enter at this level or when it breaks the resistance level then after broken it is the level for the buyer for entering with their buy trade, at the same time who has already sell can exit at here.
After entering the trade, you can expect 10% profit but then you have to think twice whether continue with the same trade or be good to exit with 10% profit.
| Question 2: What is a a Gap and What happens in the market to cause It. |
As per the above image, we can see how the Gap appeared on the Live market, let's understand more about Gap.
GAP.
Basically, Gap appeared in the price of the assets when suddenly buyer/seller cancel their orders then accordingly price jump to the next available buyer/seller.
According to the cancel orders of buyer or seller, the price will jump to the direction of where the pressure is, it will either upside or downside.
What happens in the market to cause It.
Because of the pressure on one side, the market price will be possible to go in the same direction. Due to this, there could be possible that unnecessary noise gets created and panic traders get trapped in this situation. Also, those who have set their stop-loss in between this gap, they get minus with few more point because there is no one to buy or sell at your stop-loss level.
| Question 3: Explain the types of Gap. |
Basically, there are mainly two types of GAP we can see on the charts that are Gap up and Gap down, first I will explain both types and then graphically show the same in one chart.
GAP UP
GAP up appears on the chart when the seller cancels their orders or at some point, there is no seller in between then buyers have to buy where the seller is available, due to which the gap appeared in the chart, in between two candle.
Usually, it happens when a particular time frame of Candle is completed and then the next candle starts from the above gap.
GAP DOWN
GAP Down appears on the chart when the buyers cancel their orders or at some point, there is no buyer in between then seller have to sell where the buyer is available, due to which the gap appeared in the chart in between two candle
Usually, it happens when a particular time frame of Candle is completed and then the next candle starts from below the gap.
| Question 5: Through a Demo account, perform the (buy/sell) through Gaps levels. Explain the procedure (Required Screenshots). |
I will demonstrate how to trade in Gapu up and Gap down situation, for this I will show you one graph in which both information is available, below is the same.
It is not recommended for new traders to use this in their daily trade because trading in Gap up and Gap down there is huge risk is available, the only quickest traders can use this method and freshers can try with very small amount of investment.
Buy/Sell through Gaps levels and Procedure.
Gap Down
As per the above image, concentrate on the Gap down, as mentioned above Gap Down appear when the last candle is closed and the new candle starts below the gap, the sell trader quickly enter when candle start below the gap and those who have brought can think to square off their position.
If the seller missed this trade no worry they can wait for the next candle, if the next candle also starts close to the gap down candle ends then it is a second chance for the selling trader to quickly enter, those who have brought can think again to square off their position to save capital/profit.
After entering the trade, you can expect 10% profit but then you have to think twice whether continue with the same trade or be good to exit with 10% profit.
Gap Up
As per the above image, concentrate on the Gap Up, as mentioned above Gap Up appear when the last candle is closed and the new candle starts above the gap, the buyer trader can quickly enter when the candle starts above the gap and those who have taken sell trade can think to square off their position.
If the buyer missed this trade no worry they can wait for the next candle, if the next candle also starts close to the gap up candle ends then it is a second chance for the Buy trader to quickly enter, those who have taken sell trade can think again to square off their position to save capital/profit.
After entering the trade, you can expect 10% profit but then you have to think twice whether continue with the same trade or be good to exit with 10% profit.
(All screenshots in this post are taken through TradingView and through my own charts.)
#allbert-s4week1
#cryptoacademy
#india
Cc: @allbert
Thank You.
@stream4u
