If any trader who trades cryptocurrencies is trying to explore new trading possibilities, then it becomes very important to properly use a perfect combination of technical indicators and chart patterns. If you read Tweezer Bottom’s Candlestick Patterns blog, you’ll learn the essential technical patterns that can boost your technical analysis while trading cryptocurrencies.
While technical indicators give a complete insight into statistics, chart patterns explain the complete psychology of the market with the help of price action. Since this is a subjective matter, it is more difficult for traders to master compared to technical indicators.
Read on if you want to know what chart patterns mean, the different types of crypto chart patterns, and the best strategies to use when trading cryptocurrencies.
What is meant by chart patterns?
Chart patterns are nothing more than normal price patterns displayed via a chart. At first, these price movements may seem random. However, it is not so. All businessmen look closely at this series of patterns to look at the market holistically.
They also supplement their evaluation with other forms of technical analysis, including candlestick patterns or technical indicators, so they can make better trading decisions.
Top 7 Crypto Chart Patterns
Although there are more than hundreds of different chart patterns, only a few of them can survive over time. Because the subject of chart patterns is subjective, there are no specific cryptographic patterns that can be shown to be better than others.
Since we are discussing crypto chart patterns, if you are looking for an amazing platform, you will be happy to know that the 3 Bar Play trading pattern is a common trading chart pattern among cryptocurrency traders. Try using it and you will realize why most of the cryptocurrency traders use it extensively.
Now, as I mentioned, some of the cryptocurrencies had marked their identity from the test of time. Therefore, below is the list of those handfuls of chart patterns:
- Head shoulders
- pricing channels
- Rising wedge and falling wedge
- ascending triangle and descending triangle
- Upper and lower triple and double
- bullish and bearish flag
- channel down and channel up
This specific one, Head & Shoulders, is a slightly advanced chart pattern that is followed by a temporary high or low, then a further move up or down, and finally with the third move up or down, which is the same as the first. move. If you see its pattern, it will appear as a single head with two shoulders that can be positioned face down or face up.
To create price channels and crypto chart patterns, two horizontal parallel lines are created, either rising or falling, showing a series of highs and lows. Lower means the areas of support, and higher implies resistance.
Prices fluctuate between these two extremes. Most of the brokers buy cryptos in the low period and tend to sell during the high period. When buying and selling cryptos, the occurrence of breakouts or breakdowns can lead to crucial moves and therefore cannot be ignored even when trading cryptocurrencies.
The crypto pattern of this particular type is almost similar to the ascending and descending triangles, except one thing is that the top and bottom lines are sloping in the same direction. Also, the rising wedge and the falling wedge are reversal patterns where the rising wedge is considered the bearish signal and the falling wedge is known as the bullish signal.
Here, the increasing and decreasing triangles are formed with two additional lines:
- the horizontal trend line connecting highs or lows
- Another sloping trend line connecting descending highs or lows
The final right triangle results in a decision point where the price can either break out or fall towards the sloping line from the horizontal line.
Sometimes the market also bounces off the same resistance through the upper or lower level two or three times in a row. If that is the case, then it is called a triple or double top and bottom cryptocurrency chart pattern.
Your bullish position is called a double bottom and a bearish signal is known as a double top. Both triple and double patterns are reverse setup forms, indicating that different price patterns can influence direction.
If you talk about the most frequent crypto patterns then they are double tops and bottoms, however triple patterns are the best as they generate large reversals frequently.
These are those cryptographic patterns that include small rectangular exchanges. It stays within the parallel diagonal lines for a temporary period and acts against the prevailing price for a longer period. It usually occurs after an immediate profit or loss and therefore indicates a small change in trend often before the previous trend returns.
The two examples are bullish flags and bearish flags. They are popularly known as flag patterns. Several traders consider this crypto pattern to be the most reliable.
This type of crypto pattern is parallel diagonal lines of trading range. When an uptrend or downtrend crosses parallel support and resistance lines, this crypto pattern is formed. It results in a potential trend reversal or a change in the slope of the current trend.
If any trader is following this crypto pattern, then as a first step, they watch the price changes and infer that a specific price may stay there, then the trader initiates the trade. It is suggested to start trading when the price crosses the trend lines of the channel. It can be crossed with full patterns either on top or bottom. If this happens, the price can rise sharply in the direction of the breakout.
The best ways to trade cryptocurrencies
To assess the psychology of the market, cryptocurrency chart patterns are considered the most useful tools. However, it is also true that these are subjective rather than technical indicators.
In other words, you can also say that there is no standard definition for how many parallels the shoulders should stay in a head and shoulder pattern or at what point price should break out of a growing triangle.
If you are wondering how this can be decided, then it is entirely up to the trader who defines their ways. The best ways to trade cryptocurrencies are briefly explained below:
Through this strategy, traders take their positions and exit the same day. The goal is to profit amidst fluctuating price movements.
This includes using very high trading volumes to make a profit. Although this strategy involves risk, an effective trader knows how to maintain margin requirements to avoid a bad trading experience.
It requires the analysis of crypto assets, volumes and past trends, and the selection of any entry and exit point in a single day.
To create a balanced portfolio, you need to maintain a fixed amount of ongoing investments in multiple cryptocurrencies like Bitcoin, Dogecoin, Ethereum, and many more.
In this way, the amount of risk involved increases gradually in a systematic way only. Thus, you build your portfolio and earn higher returns in the long run.
This is one of the most important strategies, as it precedes the selection of any other strategy. You need to stay up to date with news relevant to the crypto industry, assess your finances, and form an investment goal accordingly.
This strategy consists of buying cryptocurrencies in one market and then selling them in another to make a profit. The trader must open accounts on exchanges that show the differences between the price he bought and the one he is trading.
DCA requires a trader to invest a specified amount at regular intervals. Traders need to study the current market trend and understand it in depth at the right time.
final thoughts
From the above article, it is concluded that traders can access information about market psychology through chart patterns. However, always keep in mind that they should not be the only tool to help you when trading cryptocurrencies. It is equally important to deeply understand technical indicators, which can never be obtained through chart patterns.
The study of technical indicators gives a complete picture of the market dynamics so that you can achieve the desired results. Also, do not forget to pay attention to the strategy you choose when trading cryptocurrencies. The more effective your strategy is, the more chances you have of making a profit.
Categories: Technology
Source: SCHOOL TRANG DAI
