The main concepts behind crypto chart patterns include support and resistance levels. Prices oscillate over time and support and resistance levels are the areas where prices bounce back from downwards movements. As prices return to these levels, support and resistance become stronger. The price of a coin passes through these zones – known as a breakout – and will find its next level of support or resistance. Similarly, a bearish candlestick pattern is a reversal of the previous trend.
Similarly to candlestick charts, crypto charts often feature certain shapes and patterns that can be used to identify the next big move. By learning the shapes and patterns of crypto charts, you can begin to predict the outcome of a price movement in a few weeks. If you learn how to spot these patterns, you will be able to recognize them when analyzing real price movements. Learning how to identify these patterns will increase your chances of achieving substantial gains.
Head and Shoulders: This chart pattern is slightly more advanced. It involves a high that lasts for a short period followed by a larger move. It looks like a head with two shoulders. Head and shoulders are also known as “bullish and bearish” patterns. Head and shoulders patterns are often accompanied by an inverted version. This is because they depict a tug-of-war between buyers and sellers. Ultimately, one side dominates the other.
Triple Bottoms: A triple bottom pattern has a similar pattern to a double top, but it contains three swing lows at the same level. When price breaks above this level, the prior bearish trend is reversing. Rounding Tops and Bottoms
Before using any patterns, it is crucial to know what time frame they belong to. In the case of crypto chart patterns, it is wise to select a higher-frequency time frame if you’re a beginner. Lower-frequency time frames require more trade management. The Horizontal Level Breakout has the same chance of success on the daily (1D) time frame as it does on the hourly (1H) interval. So, when using a trend line to analyze a crypto currency’s price, you will be able to trade it.
Candlesticks: A simple candlestick with two distinct colors – green and red – denotes that the price of a particular asset has risen or fallen. Candlesticks are also useful indicators of trend reversals for technical analysts. Traders should pay attention to bullish candlestick patterns. If the wick of the candlestick is long, the trader is taking profits from a previously successful investment. Conversely, when it is short, the trader is buying an asset, and vice versa.
If you’re looking to predict the future direction of cryptocurrency prices, you should learn the two most common crypto chart patterns. The double top and the double bottom are bearish reversal patterns that traders use to highlight reversals in the market. A double top occurs when the price reaches a high, retrace back to a support level, and then climbs again. If it fails to break a support level, the price will reverse and move downwards.