While trading bitcoins, technical analysis is a very important factor and trading patterns or chart patterns are a significant part of trading. But before using them for your trading, you have to make sure that you are well aware of these trading patterns.
A chart pattern can be considered as a price chart that predicts the next prices depending on their past experiences. They are very important for technical analysis and the goal of the trader is also significant to understand
There is no perfect chart pattern. Each of them is used to show the different trends in various markets. While some patterns are perfect for a volatile market, others are good choices for a bullish market.
While trading bitcoin, you must choose the best pattern for your market. Choosing the wrong one may lead you to losses or you may miss a good opportunity that would have given you great profits.
Below are the most popular patterns that are used for trading. Understand each of them in detail so that you can easily figure out the one that suits you the best.
- Head and Shoulders
In this pattern, there will be a smaller peak on one or the other side of a large peak. This method is popularly used for reversals that are bullish to bearish. The pattern will have a second peak that is larger than the first and third ones. But all of them will back off to the same support level, which is also called the neckline. When the third peak falls back to the support level, there are high chances of a breakout to a bearish decline.
- Double Top
This pattern is ideal for displaying trend reversals. Usually, there will be a peak in the price of an asset before returning to a support level. Before reversing back, it will climb again for one more time more permanently as opposed to the trend that prevails.
- Double Bottom
This pattern shows a selling price that will cause the price of the asset to fall below a support level. Then, it will climb to a resistance level before falling again. In the end, the trend will overturn, and the market becomes more bullish.
- Ascending Triangle
This is a bullish continuation pattern that points out an uptrend’s continuation. This pattern can be drawn on a chart by laying down a horizontal line across the swing highs and the resistance. After that, an ascending line will be drawn across the swing lows and the support. There will be two or more similar peak highs that allow drawing the horizontal line. The pattern’s overall uptrend will be highlighted by the trend line and the horizontal line depicts resistance’s historic level for the asset.
- Descending Triangle
This pattern indicates a downtrend’s bearish continuation. During the descending triangle, the trader will open a short position, mostly using CFDs to make a profit from a dropping market. They typically move lower and step forward to the support as they are suggestive of a market full of sellers. This means that back-to-back lower peaks can be expected frequently and it may not reverse.