Crypto Academy / Season 4 / Week 3 / Intermediate- HOMEWORK for Professor @allbert: Trading with Contractile Diagonals by @dilchamo

Entire Question

Homework Task (Season 4/Week-3)

Before starting your answers this week, make sure you have read this publication at least twice and make your own research to understand the concepts.

1- Define in your own words what a contractile diagonal is and why it is important to study it. Explain what happens in the market for this chart pattern to occur. (screenshot required / Bitcoin not allowed)

2- Give an example of a Contractile Diagonal that meets the criteria of operability and an example of a Contractile Diagonal that does NOT meet the criteria. (screenshot required / Bitcoin not allowed)

3- Through your Verified exchange account, perform one REAL buy operation (15 USD minimum), through the Contractile Diagonal method. Explain the process and demonstrate the results and graphical analysis through screenshots. Your purchase data must match your analysis data: such as cryptocurrency and entry price.

4- Through a DEMO account, perform one sell operation, through the Contractile Diagonal method. Explain the process and demonstrate the results and graphical analysis through screenshots. Bitcoin is not allowed.

5- Explain and develop why not all contractile diagonals are operative from a practical point of view. (screenshot required / Bitcoin not allowed)

1- Define in your own words what a contractile diagonal is and why it is important to study it. Explain what happens in the market for this chart pattern to occur. (screenshot required / Bitcoin not allowed)

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When performing a trade, traders pay attention for repetitive patterns that can help them in forecasting the price trend of assets on the market with a fair degree of precision, and one of the frequent price patterns of assets on the market is the Contractile Diagonal. Contractile Diagonalscan be recognized with ease due to their peculiar traits.
These lines function as resistance and support for the particular waves under consideration. These waves adhere to the 1,2,3,4, and 5 wave trends. The 1,3, and 5 are the price bumps located on the resistance/support trendline, whereas the 2 and 4 are respective price changes that correspond to the support/resistance trendlines, depending on the direction of the market and also the decreasing volume of trade of the asset and the emergence of a new price trend. The decreasing volume of the asset operation on the market is evident through the reduction in the wave length of the wedges as support and resistance trendlines begin to merge. Also, such activities are usually followed by either a bullish or bearish price direction.

The formation of wedges arises when traders execute buy or sell orders from an intense magnitude to a lesser magnitude, and as a result, the current bullish or bearish trend thwarts as they are not many executions to keep the market going in that respective direction due to the reduced trade volume. Hence, the alternate form of traders take over the market and direct it from a bullish trend to a bearish trend.

2- Give an example of a Contractile Diagonal that meets the criteria of operability and an example of a Contractile Diagonal that does NOT meet the criteria. (Screenshot required / Bitcoin not allowed)

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In bearish price action, the first support trend line hits Pivot 1, and then Pivot 3 and Pivot 5. All these points must be in agreement. The length of each previous wave must be taller than its next. If this criteria is not satisfied, the section of that particular chart of the asset should be discarded.

In bullish price action, the initial resistance trend line hits Pivot 1, and subsequently Pivot 3 and Pivot 5. The support trend line has to touch both Pivot 2 and 4. If these criteria are not satisfied, the section of that particular chart of the asset should be discarded.

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According to the contractile diagonal signal I can perform my Buy order. Length of line 1 is longer than line 3. line 3, in the same way, is longer than line 5. Also, line 2 is lengthier than line 4. The support and resistance diagonals are seen converging as the respective pivots are congruent on each trend line.

3- Through your Verified exchange account, perform one REAL buy operation (15 USD minimum), through the Contractile Diagonal method. Explain the process and demonstrate the results and graphical analysis through screenshots. Your purchase data must match your analysis data: such as cryptocurrency and entry price.

BNB/ USDT is the cryptocurrency pair which I chose to perform my buy operation. I have identified and marked the stop loss level and take profit level. My entry is at the point of 375.843. According to the contractile diagonal signal I can perform my Buy order. Length of line 1 is longer than line 3. line 3, in the same way, is longer than line 5. Also, line 2 is lengthier than line 4. The support and resistance diagonals are seen converging as the respective pivots are congruent on each trend line.

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As you can see below my entry price is 375.843 and the mark price is 378.941. That means I have gained a simple profit from my order. It is a profit of 0.17% profit.

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4- Through a DEMO account, perform one sell operation, through the Contractile Diagonal method. Explain the process and demonstrate the results and graphical analysis through screenshots. Bitcoin is not allowed.

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To perform the sell operation I have selected the SOL/US DT cryptocurrency pair. The length of line 1 is longer than line 3. Line 3, in the same manner, is longer than line 5. Also, Line 2 is lengthier than line 4. The support and resistance diagonals are seen converging as the respective pivots are congruent on each trend line. The contractile diagonal have shown me the price trend so I can easily perform my order.

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I have identified the take profit and stop loss levels and also I have pointed out my entry point. As you can see the average fill price is 144.00. The last price is 144.13 which has brought me a simple profit of 1.58 USD.

5- Explain and develop why not all contractile diagonals are operative from a practical point of view. (screenshot required / Bitcoin not allowed)

Not all contractile diagonals are considered operable in the sense that such diagonals do not strictly follow the rules established. The points 1, 3, and 5 must follow in the order of reduced its lengths. Then the lines 2 and 4. Also, the trend lines must touch all Points 1, 3, 5, and 2, 4 at the respective side of the price fluctuations. The reversal breakout holds for a longer period, and good risk management must be placed so the take profit is set to the point 2 margins, whereas the Stop Loss margin is set to the Point 5 margin.

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This BNBUSDT chart shows a contractile diagonal. The length of line 1 is longer than line 3, and line 3 is longer than line 5. Line 2, is longer than line 4. Even though this satisfies the contractile diagonals but the trend does not follow the contractile diagonal. The trend goes for a sudden change which is a risk for the traders.

CONCLUSION

Contractile diagonals pattern can be recognized at various time intervals on the charts of different assets. Contractile Diagonals also demand good risk management, and this aid in protecting traders from wrong signals since no pattern is 100% accurate every time. I thank Professor @allbert for this lesson.