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Greetings guys and welcome to my homework post for the topic "Recognizing Simple Patterns in Trading" which is taught in the Steemit Crypto Academy by professor @sachin08.
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<div class="phishy"><center><h3>1. What is your understanding about Triangles in Trading. Explain all forms of triangles in your own words. (Screenshot required)</h3></center></div>
When analyzing a chart, we tend to notice several market patterns shown with the candlesticks. A good example of such patterns which we notice in market charts include triangles. Triangles with the use of the patterns, give the user several information relating to when he can place his trade from the breakout, or the movement of the market itself. Triangles can help identify breakouts of currencies and this makes them very useful. They can give users perfect entry points into the market that can bring the user profits.
There are 3 types or forms of triangles shown by patterns and they are symmetrical triangle, ascending triangle, and descending triangle.
<h4>a. Symmetrical or neutral triangle.</h4>
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A symmetrical triangle is a triangular pattern where there is an equal chance of a breakout in either direction; whether up or down. With the symmetrical triangle, there is no horizontal line to determine entry point. Instead, there are resistance and support lines. When the price breaks the resistance point moving upwards, this indicates a buy option from a bullish trend and when the price breaks the support line moving downwards, this indicates a bearish movement and thus a good selling point.
<sub>[Source](https://www.tradingview.com/chart/hMNPLBT8/?symbol=BINANCE%3AETHUSDT)</sub>
From the above image, we can see the symmetrical triangle for the price movement of the currency pair ETHUSDT. We can see the resistance lines and the support lines. If the price breaks the resistance line and goes upward, this is the time to enter the trade and buy.
While if the price breaks the support line and goes downwards, this is an indication of the bearish trend.
<h4>b. Ascending or bullish triangle.</h4>
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The bullish or ascending triangle, is a triangle which will result in an upward trend and rise in price. For this triangle, a bullish trendline will be drawn under the candlesticks and a horizontal line is drawn above the candlesticks. When the price reaches the horizontal line, it bounces and stays in between the ascending line and horizontal line. Otherwise, it will break the horizontal line and continue into the bullish trend.
<sub>[Source](https://www.tradingview.com/chart/hMNPLBT8/?symbol=BINANCE%3AETHUSDT)</sub>
From the above image, we can see the bullish or ascending triangle. The ascending trend line is shown as well as the straight resistance line. When the breakout occurred at the point where the price crossed the straight resistance, there was a rise in the price and if a trader had placed his trade as soon as the breakout occurred, then there will be profits made.
<h4>c. Descending or bearish triangle.</h4>
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The descending or bearish triangle, is a triangular pattern, which involves a descending trendline and a straight support line which is used to determine the entry point of trade. The descending trendline is drawn above the candlesticks and the straight support line is below the candlesticks. As soon as the price crosses the straight support line and moves downwards, then the sell trade should be placed.
<sub>[Source](https://www.tradingview.com/chart/hMNPLBT8/?symbol=BINANCE%3AETHUSDT)</sub>
From the above image of the ETHUSDT chart, we can identify the bearish triangle is shown. The descending trendline is drawn above the candles and the straight line is drawn below. As soon as the price broke the straight line, there was downward movement. This was the time for a good entry in to trade and sell ETHUSDT.
<div class="phishy"><center><h3>2. Can we also use some Indicators along with it Triangle Patterns? Explain with Screenshots.</h3></center></div>
When analyzing a market or a chart to decide whether to enter a trade or not, we should not just use price action styles such as triangle patterns alone. We should also include Technical Indicators. This is because, when using the price action techniques, we may not be certain of the trade cause there are possibilities of fake outs. We need to use indicators in correlation or in agreement with the price action in order to get the right signals that have a higher percentage of profits and not fake outs.
An example of using triangle patterns in agreement with technical indicators will be in the chart below.
<sub>[Source](https://www.tradingview.com/chart/hMNPLBT8/?symbol=BINANCE%3AETHUSDT)</sub>
The above chart is of ADAUSDT market. In the above image, we can see the bearish triangle pattern forming and it is made visible using the downward trendline and the straight support line. Normally, as soon as the breakout occurs when the price the straight support line, indicating a sell trade entry, we will also look down at the Relative Strength Index to see whether it is indeed a bearish trend. And from the above chart, we can see the RSI cross 50 and move downwards just before the breakout of the triangle pattern. This implies that there is currently a bearish trend in the market as confirmed by both the RSI and the triangle pattern.
We can all see the downward movement in the price of ADAUSDT after the breakout and this is evidence of the accuracy of both the RSI and triangle pattern.
<div class="phishy"><center><h3>3. Explain Flags in Trading in your own words and provide screenshots of both Bull Flag and Bear Flag.</h3></center></div>
Another pattern which we can notice and take advantage of in the market is the flag pattern.
The flag pattern is almost the same as the triangle pattern, but the difference between the both of them lies in the quality of the analysis. Flag patterns have a higher rate of quality and accurate trades more than the triangle pattern.
The flag pattern is seen when, there is a drastic or strong rise or fall of the price of a currency pair and then, support and resistance points are created from the flag patterns created, in order to determine the next trend movement of the price. For a flag pattern, there can be 2 options; bullish flag and bearish flag.
<h4>a. Bullish Flag.</h4>
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A bull flag is a pattern which is seen after a strong rise in the price or after a bullish trend. When the rise in the price stops, the pattern of the candles will give a downward facing flag. This characterizes the bullish flag pattern. We will see our flag by drawing our resistance and support lines after drawing the upward trend line.
As soon as the price breaks the resistance line, this is a good entry point into the market.
From the above chart, we can see the resistance and support lines which are drawn in the pattern after the impulsive rise in the price of ADAUSDT. This is a good example of the bullish flag as it demonstrates the bullish flag and also, indicating the support line and resistance line.
<h4>b. Bearish Flag.</h4>
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A bearish flag pattern can be seen after a dramatic fall in the price of a currency pair. Once the strong bearish trend is over, the candles will form what looks like an upward facing flag or an upside down flag. The flag is drawn by drawing a bearish trendline to the strong bearish trend, drawing a resistance line and a support line. As soon as the price crosses the support line, this is a good indicator for the trader to place his order.
From the above image, we can see the downward trendline for the strong fall in the price of ADAUSDT. After the strong trend, the market will form the flag pattern. We identify this pattern and look for entry points by drawing the resistance and support lines. From the above chart, there is a breakout at the support line indicating the trader to enter the market and place his order.
<div class="phishy"><center><h3>4. Show a full trade setup using these Patterns on any Cryptocurrency chart. (Ascending Triangle, Symmetrical Triangle, Bear Flag)</h3></center></div>
<h4>1. Ascending triangle.</h4>
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<sub>[Source](https://www.tradingview.com/chart/hMNPLBT8/?symbol=BINANCE%3AETHUSDT)</sub>
From the above chart of the currency pair ETHUSDT, we can see the upward moving bullish line and the flat resistance line. As soon as the price crosses the flat line, there is a breakout and this makes the perfect chance to enter into the market and place the buy order. After placing the buy order for ETHUSDT, place the take profit and the stop loss. My stop loss is a bit lower than the ascending trendline which acts as the support line.
<h4>2. Symmetrical triangle.</h4>
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<sub>[Source](https://www.tradingview.com/chart/hMNPLBT8/?symbol=BINANCE%3AETHUSDT)</sub>
With the above chart, we can see the support and resistance lines from the movement of the ETHUSDT price. This support and resistance lines form a symmetrical triangle which makes a 50/50 chance of either am upward trend ( break of the resistance line) or a downward trend )breakout of the support line.
There is breakout in the resistance line which indicates that this is a good entry point for the trader to place his buy order for ETHUSDT. I have put my Take Profits higher that the resistance line, and my Stop loss, a little bit lower than the Support line making the risk:reward ratio to be high in favour of the reward.
<h4>3. Bear Flag.</h4>
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<sub>[Source](https://www.tradingview.com/chart/hMNPLBT8/?symbol=BINANCE%3AETHUSDT)</sub>
From the above chart of ETHUSDT, we can see the bearish trendline and when the trend stopped, it formed a bearish flag facing upwards or an upside down flag. My resistance line is drawn above the candles and my support line is drawn below the candlesticks. As soon as there is a breakout in the support line, this is a good entry point for the trader into the market by selling ETHUSDT. The take profits and stop loss is placed to make the rewards higher than the risk.
<center><h3>*Conclusion.*</h3></center>
When analysing a market, we can see so many patterns that are formed by the movement in price that is influenced by the demand and supply of the currency. These patterns could include triangle patterns such as ascending triangles, descending triangles and asymmetric triangles. Also, the patterns could be flag patterns that come after strong trend movements. Such flags are the bearish flag and the bullish flag. The bearish flag is formed after a strong bearish movement and the bullish flag is formed after strong bullish movements.
All these patterns are very helpful to determine good entry points into the market, but they need to be backed by Technical indicators.
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Thank you for reading and God bless you.
CC: @sachin08
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