Crypto Patterns – Reading Between the Lines

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The fancy dance of graphic lines in the crypto charts is hardly a chaotic form. An experienced eye will catch a consequence of patterns and breakouts there. According to the prevailing figure, some assumptions about the price can be made. And not just about price —- patterns may indicate the change of a trend.

What are the basics of crypto patterns? Here we have a brief summary of the most important details about the patterns.

Some Helpers Along the Way

Patterns are a common technical analysis tool in trading. They can show the current picture in different time frames, whether a trader uses a 15-minute period or a one-day period.

To identify the patterns, it’s useful to know about support and resistance lines and candlesticks on a chart.

Support and resistance lines indicate the potential level where the price will show similar behavior. That is, under which or above which line the price will not hypothetically move. To draw such lines, use past data — look at the extremes of the price to get an idea of how high or low it can move. Make sure such extremes are obvious and repeat themselves throughout a timeframe. In a way, the support and resistance lines reflect the traders’ behavior. 

Candlestick patterns are another useful tool to read the mind of the market mood. This helps estimate the traders’ behavior and your potential profit from it.

Each candle has a body and a shadow. On a trading chart, there will be dark and light or red and green candles. 

Color represents the nature of a candle. Dark or red means the candle is bearish. Light or green means the candle is bullish. The shadow of the candles indicates the close and open prices.

Most Common Crypto Patterns 

For each trader, there will be a personal top of the most accurate figures. This usually takes time to define, so make sure you know as many figures as possible. , for example, will help to organize the meaning of the patterns in a few minutes. 

Here we will have a look at a few examples of the patterns.

Head and Shoulders/Inverse Head and Shoulders

One of the most common trading patterns indicates the end of an uptrend. If it is in its inverted form, that will mark the end of a downtrend. 

Head and shoulders are considered to be a bearish sign in its exact view, and a bullish sign in its reversed view.

Predictably, the pattern looks like two peaks with equal highs and one more prominent peak with a higher high in between.

The inverse head and shoulders figure looks like two equal lows below the neckline and with a lower low in between them. 

Double Top/Double Bottom

This is the end of an uptrend pattern. Its reversed brother is a double bottom that signals the end of a downtrend.

A double top is a bearish sign, and a double bottom is a bullish sign.

On the chart, the double top looks like the letter M — with two equal highs. Unlike the head and shoulders pattern which has a peak in between, the double top has a gap between the highs.

The double bottom looks more like a W and forms two equal lows at a resistance line with a prominent peak in between. 

Sometimes it can continue to transform into triple top/triple bottom. Therefore, it’s important to wait for the break of the support or resistance line, so as not to mess up price prediction.

Bull Flag/Bear Flag

The bull flag is a continuation of an uptrend pattern. As its name suggests, it’s a symbol of a bullish trend.

On the chart, it looks like a consequence of highs and lows within a descending channel.

The bear flag means the continuation of a downtrend. Its name is also descriptive — it’s a bearish trend sign. 

Similar to its opposite, the bearish flag is depicted as the consequence of highs and lows. However, this time the channel will be ascending. 

Conclusion

As you can tell, you don’t have to be Warren Buffett to read the patterns. Pay attention to support and resistance lines, read candlesticks, and make your own conclusions. The key thing to remember about patterns is that some of them indicate the start of a bearish trend while others are bullish. The main rule in patterns is that it’s not 100% of a specific outcome. Though buy-sell behavior in trading tends to repeat itself, it’s not always the key factor for price movement. Look for proof of your suggestions in other trading signals and enjoy your successful deals.