Cryptocurrency Trading Patterns:
Crypto chart patterns are essential trading tools that should be used as part of your technical analysis strategy. From newbies to advanced traders, chart patterns play a crucial role when looking for market trends and predicting price movements.
Trading chart patterns often form shapes, which can be utilized to predetermine price action, such as price breakouts and reversals. Understanding chart patterns will assist you gain profits in the crypto market, and using them will increase the value of your future technical analysis.
Prior to beginning with your chart pattern analysis, it is essential to learn different types of trading charts. So let’s get started!
1. Uptrend (Ascending Triangle Pattern):
The ascending triangle is a bullish continuation pattern that indicates breakdown is likely to happen when the Support line and Ascending lower trend lines are nearly close or intersect each other. (The support line is horizontal, and the resistance line is ascending in the chart below.)
In this kind of pattern buyers will outnumber the sellers, resulting in an overbought state and values start to dip from there. However, buyers re-enter the market and price are driven back to the recent high, where selling occurs once more. Buyers re-enter the market, now at a level higher than before. The result is study high, breaking resistance level this time price will reach new all time high!
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1. Ascending Triangle.
2. Downtrend (Descending Triangle):
The descending triangle showcases a bearish market, a downtrend. The support line is horizontal, and the resistance line is descending, indicating the possibility of a downward breakout.
In these patterns, sellers slightly outnumber buyers. The market becomes oversold and prices start to spike. However, sellers then re-enters the market and prices are driven back down to the recent low, where buying occurs once more. Sellers re-enter the market, but at a lower level than before. The result is lower highs with a steady low. Prices eventually break through the support line where the lows were formed and are propelled even lower as selling increases along with an expansion in volume.
3. Symmetric Triangle Pattern:
A symmetrical triangle chart pattern indicates a time frame of consolidation before the price is forced to breakout or breakdown. A breakout from the upper trendline represents the bullish trend, and breakdown from the lower trendline implies the start of a new bearish trend.
When the support trend line joining consecutive lows and the resistance trend line joining consecutive highs are plotted, they result in a convergence of two trend lines with a certain degree of symmetry. These symmetrical triangles indicate a period of uncertainty when the forces of supply and demand in the market are nearly the same.
During such periods attempts to push the price up are met with selling and attempts to push the price down are met with buying. The price will break out of the triangle, usually this break out is accompanied by an increase in volume, and is usually in the direction of the preceding trend.
4. Wedge pattern:
A wedge pattern represents a tightening price movement between two converging trend lines, this can be either a two converging trend lines, rising wedge or a falling wedge. Unlike the triangle, the wedge doesn’t have a horizontal trend line and is characterized by either two upward trend lines or two downward trend lines.
For a downward wedge, it is thought that the price will break through the resistance and for an upward wedge, the price breaks through the support. This means the wedge is a reversal pattern as the breakout is opposite to the general trend.
The patterns described in this article are essential technical price indicators which can assist you to learn how or why an asset’s price moved in a particular way, and which way it might move in the future. This is because chart patterns are capable of highlighting areas of support and resistance, which can help a trader decide whether they should open a long or short position, and when to close and exit the trade.