The ability to spot Crypto trading patterns as they are forming is a very lucrative skill.
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Why Crypto Trading Patterns are important to use ?
If you use them in conjunction with other trading techniques , you can make higher percentage trades than if you didn’t know them.
List of some of the most Profitable trading patterns.
1. Double Bottom
A double bottom pattern occurs when there are two bounces off of the same level of support. Essentially, this pattern occurs after a bearish period and signals a reversal in favour of the bulls.
This pattern is viewed so bullishly because two bounces off the same level confirm that level as support. Meaning the price can increase .
The big move associated with this pattern comes after breaking the “neckline” , shown by the top rectangle zone.
2. The Double Top
A double-top pattern is the opposite of the previously mentioned pattern. It is marked by two rejections off of the same resistance area. This pattern is a bearish reversal pattern, meaning that the price enters this pattern bullish.
Additionally, it leaves this pattern bearish. One reason this pattern occurs is that often at resistance levels, traders will buy in with hopes of a breakout to further levels.
When this breakout fails to appear , and the price falls, their trade is now in a loss. When the price returns to this same level, traders will often cut their losses. And eventually, sell in the areas where they opened the trade.
Again, pushing the price further down. Typically, this pattern is confirmed after seeing the two rejections and then a neckline break.
3. Head and Shoulders Pattern
The head and shoulders pattern is an infamous trading pattern named after its similarities with a person’s silhouette .
This is a bearish reversal pattern that signifies bearish price action in the near term.
Again it is identified by two lower peaks (the shoulders) and one higher central peak (the head) . Much like the double bottom and double top, the pattern is confirmed by the break of the neckline.
3. Inverse Head and Shoulders Pattern
The inverse head and shoulders pattern is the reverse of the head and shoulders pattern. It is bullish reversal pattern. If it plays out, it also the trend changes from bearish to bullish.
Like the head and shoulder pattern, it is also identified by two shoulders and a head. However, these are flipped, with the heads and shoulders seeming more like two dips with a more significant drop in the middle.
Triangle Patterns are pervasive in crypto. Many variations , such as wedges and microphone patterns and more, could be placed into this category .
But for the sake of simplicity , only the basics I am covering here.
Common attributes of all triangle patterns are two intersecting trendlines forming a triangle. One acting as support and one acting as resistance .
There then is a tightening or compression of price as the triangle pattern plays out until the support trend line breaks. (and price breaks down)
Or the resistance trend line breaks (and price breaks out) .This occurs because , like a spring , price tends to get pent up and then explodes in whichever direction breaks.
The trading patterns occur almost every time frame and as a trader learning their structure is very worthwhile .
This is because the better you get at spotting them , the more likely you can catch them . Forming in real-time and plan your trades accordingly .
Although there are other patterns not mentioned in this article such as the cup and handle . And microphone pattern , channels and more the patterns listed are great first tools in your trader’s toolbox to use to gain insights on the markets.
Final note ……………….
Remember, patterns are best used in conjunction with other indicators to add layers of confirmation to your analysis.
They are a formidable tool to add to your trader’s kit so use them wisely and knuckle down for a hard study. Indeed, charting patterns are generally best used in conjunction with other technical tools.
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The Head and Shoulders is one of the most reliable crypto graph patterns. It signifies a bearish reversal that can form at the end of a bullish trend. The shape comprises three parts . a.temporary high that forms a shoulder, a larger move-up that forms the head, and a third shallower move-up to form the other shoulder.
Because human emotion drives the price behaviour in these markets, crypto assets like Bitcoin and Ethereum respond especially well to technical analysis, and more specifically, chart patterns. Speculators love to talk about which Bitcoin price patterns they see, for example, and are often subjective to the viewer.
Crypto trading can be profitable but also highly volatile market. Its important to do your research , start small, and manage risk carefully in order to trade crypto profitably.
Bitcoin (BTC) is the most well-known cryptocurrency, and its no surprise that many crypto enthusiasts consider, it to be the best crypto day trade. As the first and largest crypto by market capitalization. BTC is a staple in the crypto market and has shown resilience against market volatility over the years.
You should utilize popular methods like Technical Analysis, Fundamental analysis, and Sentiment Analysis.
Assessing historical price patterns underlying asset value, and market sentiment helps make informed predictions.