What are chart patterns in cryptocurrency?
Crypto chart patterns are a key element in cryptocurrency that helps traders to identify potential trading opportunities. These chart patterns help traders make accurate decisions by providing valuable predictions about the price movements in the market. The chart pattern comes in different sizes and shapes. They come in the form of triangles, head, and shoulders, or even double tops. The reports provided by each of these patterns may also vary. Some patterns hint that a market trend is about to drop while others suggest that they are likely to continue.
Traders should also possess the skill of reading and understanding patterns. This is a valuable skill that traders need to have before starting their trading career in cryptocurrency. A trader should understand the basics of a chart pattern, which can help them make accurate decisions based on the predictions.
10 leading crypto trading patterns
Head and shoulder pattern: It is one of the most advanced crypto chart patterns. They are mostly employed in technical analysis to understand the peak. This chart shows when the price of a crypto asset reaches a certain level and pulls back before retaking that level. The head and shoulder pattern is a baseline with three peaks with the central peak being the tallest and the other two being near in height. This crypto chart pattern is considered one of the most trustworthy trading charts that predicts market trend reversals and crypto cycle charts. It is one of the charts that provides a conclusion of an upward market trend.
Rising Wedge pattern: A rising wedge pattern is a bearish pattern that consists of two converging lines connecting two trending lines. It can occur in a downward trend when it is seen in a continuation pattern. On the other hand, it can also occur in an upward trend resulting in a reversal pattern. This pattern helps the traders by predicting immediate changes in the trend direction.
Falling Wedge pattern: The falling wedge pattern is a bullish pattern that shows potential upward price movement. It is the opposite of the rising wedge pattern. The pattern shows higher and lower points on the price chart. This pattern may appear quite difficult to understand just like a rising wedge pattern. However, a falling wedge pattern indicates a decrease in the downside movement thus alerting the traders of a potential trend reversal of the market prices.
Pennant or Flag pattern: A Flag pattern is a form of continuation pattern that appears after a flagpole or strong upward price movement. As the name suggests its patterns look like a pole followed by a flag. This pattern occurs when the price of an asset reaches a certain level and reverses before claiming that level. Flag patterns show predictions about the continuation of an upward trend.
Double top and Bottom pattern: Double top and bottom patterns represent opposite situations. A double top is a bearish reversal pattern that consists of two similar-sized peaks that are close together in height. This potential pattern indicates that the prices have reached a certain level but are not able to make past it. A bottom pattern is a bullish reversal pattern that also consists of two equal-sized peaks that follow one another. The pattern shows that the price has found a resistance level but is unable to enter below it.
Ascending Triangle pattern: Ascending Triangle is a bullish formation that shows a breakdown pattern. It consists of two lines a rising lower trendline and a horizontal upper trendline that form a triangle on the chart. The lines run along at least two swing highs and two swing lows. The pattern often signals the traders of breakouts that can occur either upward or downward. Since it forms a bullish continuation pattern it also gives a buy signal.
Descending Triangle pattern: The descending triangle is opposite to the ascending triangle pattern. It consists of a lower horizontal line while the upward trendline is descending. It is also a continuation pattern but looks different from the ascending triangle pattern. This pattern gives a sell signal to the traders as it shows a sign of the continuation of a potential trend.
Symmetrical Triangle pattern: This pattern consists of two converging trendlines connecting a series of higher troughs and lower peaks. These trendlines converge in opposite slopers making it look like a triangle. A symmetrical triangle pattern is a commonly observed pattern in technical analysis that helps traders by signaling the reversal of prices.
Triple Top and Bottom pattern: A triple top consists of three peaks moving in the same direction with pullbacks in between. This pattern occurs when the price of an asset reaches the upper horizontal line but fails to cross over it. It happens thrice for this pattern. It signals an upcoming downward trend for the traders. A triple bottom pattern consists of three troughs with rallies in the middle. It occurs when the price of an asset reaches a certain point and pulls back two times before kicking off a bullish trend.
Rectangle pattern: A rectangle pattern occurs when the price is continuously moving between the horizontal support and resistance levels. As the price keeps on moving between the horizontal levels, the pattern starts looking like a rectangle. The rectangle finally breaks when there is a breakdown and the price moves out of the confined space.
Also Read: Can Blockchain Be Hacked? Exploring Blockchain Security
Conclusion
Trading in cryptocurrency is a complex process. Traders should also have a proper plan before investing in cryptocurrency. Crypto trading patterns are an essential element that helps traders to make accurate trading decisions. It is also important to remember that no patterns guarantee any profits or losses. These patterns act as a guide and help traders to understand the market better and direct them towards making wise decisions on investing.