Crypto chart patterns are recognisable shapes on a price chart that provide clues as to the future direction of the market. Some of them indicate an existing trend will continue, while others predict its reversal; traders should always seek confirmation before acting upon these indicators.
Traders can utilize this information to identify potential trading opportunities. This article covers some of the most prevalent crypto chart patterns and includes a downloadable cheat sheet.
Double top
A double top chart pattern indicates an impending bullish trend reversal. Consisting of two roughly parallel peaks that roughly correspond, and connected by an increasing volume trough, its formation requires price to break below its neckline to complete it.
Traders may opt to short the cryptocurrency when it breaks below its neckline, with their target depending on its height and a stop loss above their head. This strategy may prove more efficient than other approaches that often result in false support breakages.
Double bottom
The double bottom price pattern is a classic price pattern that signals future trend reversal. Resembling an upside-down letter W, its main components include two distinct bottoms or troughs separated by an undisputable price gap, an intermediate peak between them and an intermediary peak that appears between them.
Traders tend to look for the second bottom to align with the first in order to verify a pattern. Once this occurs, prices should then rebound toward their initial low point creating a resistance line between them; when one breaks through it it signals bullish sentiment.
Triple bottom
The triple bottom chart pattern can signal a potential trend reversal. It consists of three lows that are roughly equal in price and spaced apart; traders can use this pattern to spot potential trend reversals and profit from them.
After an extended downward trend, this pattern indicates an increase in buying pressure. Once price breaks above a resistance level drawn from peaks between lows on rising volume, traders may take positions long with targets determined by distance between bottoms.
Rounded top and bottom
Crypto traders rely on the rounded top and bottom pattern to spot potential trend reversals. It emerges when an asset’s price falls to its support level before rebounding off it in an inverted “cup” shape before experiencing a slight uptrend with handle formation, signalling potential changes from downward trending to upward trends.
The Rounding Top pattern begins with an uptrend, signifying investor demand for the asset is strong. From there, price gradually moves upward in an uninterrupted spiral arc without any sudden jumps.
Rally
Chart patterns in crypto trading allow traders to predict market direction through shapes formed from fluctuating price movements, and can help traders recognize potential reversal points as well as trading opportunities more readily.
One common crypto pattern is the symmetrical triangle. This formation occurs when horizontal lows meet with descending highs and can signal either direction reversals; an increase in trading volume near the top can further reinforce this signal.
Cup and handle chart patterns are a type of bullish chart formation which arise when prices correct a portion of an uptrend and then reverse back towards previous highs forming “cup.” When complete, this handle often leads to further increases in value resulting in breakouts to new highs.
Bearish flag
The bear flag pattern is a type of chart pattern that signals continued downward movement. This occurs following a sharp decline and then an extended consolidation period; its upper and lower trend lines should remain parallel during that timeframe, as traders should look out for signs that indicate low volumes are present during that phase as this suggests reduced market interest.
Traders can utilize this information to predict the future direction of a crypto asset’s price, although no chart pattern can guarantee 100% success.
Bullish flag
Chart patterns provide traders with a useful way to anticipate price movements, but such predictions should always be treated as subjective predictions and confirmation should always be sought for patterns associated with high trading volume; such a breakout would likely represent genuine volatility rather than faked ones.
The bullish flag chart pattern is an iconic crypto chart pattern that signals a pause in trending cryptocurrency prices. Resembling a flagpole, this chart can help traders spot trading opportunities prior to any potential price moves up or down in cryptocurrency prices.
