Bullish & Bearish Cryptocurrency Trading Chart Patterns
BTCMEX reveals a cryptocurrency trading secret! Knowing chart patterns of bullish and bearish crypto markets is important. Comparing cryptocurrency price chart patterns allows traders to open possibilities to earn and profit, no matter it is a bull market or bear market.
Bullish and Bearish markets
When you can identify these patterns correctly, you can usually seize the profit opportunities brought by explosive breakthroughs. Remember, the goal is to “detect” the possibility of the potential market before the occurrence of large fluctuations to make profits in the evolution of the market.
Chart patterns will help you to judge the possible market breakthrough to a large extent. They can also indicate that the price will continue to move in the current direction of the trend or reverse the market, which is conducive to guide your trading strategy.
Don’t worry, we’ll put together a memo to help you remember these cool chart patterns and strategies. Below BTCMEX lists some of the most common chart patterns. Let’s have a closer look at them!
- Double Tops and Double Bottoms
- Triangle shape (symmetrical, ascending and descending triangles)
- Bullish and Bearish Rectangle
Double Tops and Double Bottoms
The double top is a kind of reverse form, that usually indicates the price drop after a rally. It represents the formation of the second top of the price. The top is the high point of price in a certain period of time.
When the price reaches a certain level, but it is difficult to break the level, it may form a top. When the price reaches the resistance level, the price will retreat slightly in case of resistance, but then rebound again to test the resistance level. If the price falls again from the level near this level, then we will probably see the formation of a double top pattern!
In the picture above, you can see that the price has two peaks or double peaks after a strong rally. Note that it is difficult for the second top to break through the high point of the first top. This is a strong reversal signal, which indicates that the reversal market is coming because it tells us that the buying pressure is coming to an end.
With the formation of the double top form, we can set our stop entry order below the neckline, because we expect that the price-rising market may reverse.
Remember, the double top pattern is a type of reversal pattern, so after a strong uptrend, you will look for opportunities to profit from a cryptocurrency trading price drop. You will also find that the price drop below the neckline is highly consistent with the double peak. Please keep this in mind as it helps us set profit targets.
Double Bottoms are also a form of a trend reversal, but this time it indicates the possible price increase, so we will choose to open a Long position rather than a Short one. This pattern appears after the price falls twice when two “valleys” or bottoms have been formed.
As you can see from the picture above, after the previous decline, the price has formed two lows, because it is difficult for it to fall below a certain level. Note that it is difficult for the second bottom to fall significantly below the first one. This signal shows that the selling pressure is coming to an end and the reverse market is about to open.
As the image shows, the price breaks through the neckline and goes out of the beginning of the rising market. Note that the price increase is almost in line with the double bottom. Remember, like the double tops, the double bottoms are also trend reversal. You probably will see this pattern after a strong price decline.
Triangle Chart Patterns
Symmetrical triangles are also called equilateral triangles. Generally speaking, symmetrical triangles belong to the form of consolidation, which means, the price will most likely continue to move in the original trend.
The symmetrical triangle is composed of a series of price changes, the range of which gradually shrinks. The highest price of each change is lower than the previous level, and the lowest price is higher than the previous lowest level, showing a compressed figure and finally converging at a point.
In the process of formation, the high price in the market is constantly depressed, while the low price is constantly raised. Symmetrical triangles are also a form of arrangement that represents a fight between the buyer and the seller, where neither of them can push the price to move in a favorable direction. When this happens, there will be a constantly depressed high and a constantly rising low.
With the upward and downward sloping lines gradually gathering towards a point, the market breakthrough is getting closer. We don’t know the breakthrough direction of the price, but we do know that the market is very likely to move soon. One of the sides will eventually surrender!
So, how can we use this pattern to trade? Simple. We can set the stop entry order above the declination line and below the declination line. Since we already know that the exchange rate is about to break, we only need to “take the by bus” along the direction of the price movement.
The rising triangle consists of a resistance line and a rising dip line at a low point. This time, it is difficult for buyers to push the price to break through the resistance level. However, they gradually push the price up, forming a downward line with a low point rising gradually.
As shown in the figure above, you can see that buyers are starting to build up energy as they push the price low higher and higher. They constantly put pressure on the resistance level, as a result, breaking through the market is imminent.
Now, the question is, “in which direction will the price move? Is the buyer strong enough to push the price beyond the resistance line, or will the resistance line be strong enough?” In most cases, it is the buyer who wins the battle, and the price will break the resistance line, starting the bullish trend.
However, from our past experience, this is not always the case. Sometimes, the resistance line is too strong, and the buyer does not succeed pushing the price beyond the resistance line. Nevertheless, in most cases, the price will go up. So, be prepared for the price to move, and remember, no matter bulls or bears move the market, you can go Long or Short on BTCMEX.
In the case of descending triangles, the buyer is finally defeated in the battle, and the cryptocurrency price is declining. If we set up Short orders below the support line, we are most likely to profit in the bearish market.
In the form of a descending triangle, a series of constantly depressed high points form the upper oblique line of the form. The upper oblique line plays a role of resistance line here, and the price is difficult to break through the resistance suppression of the upper oblique line. As shown in the following figure, you can see that the price shows a trend of high and low, which tells you that the seller is gradually gaining the upper hand in the game with the buyer.
In most cases, please note that we are talking about the vast majority of cases where prices will eventually fall below the support line and continue to fall. However, in some cases, the support line will be strong enough, and the price will rebound strongly after the line is supported, and finally rise. The good news is that we don’t care where the price will go. We just know that prices will move in one direction or another. In view of this, we can set up our own stop-loss order above the lower diagonal line and below the support line.
Bullish and Bearish Rectangles
When the price moves back and forth within the parallel support and resistance lines, or trading “sideways”, the pattern shape formed is a rectangle. The rectangular shape indicates that the price falls into a period of consolidation, or the hesitation between the buyer and the seller, because both want to control the market trend, but no one has the upper hand.
Before the price finally breaks through the rectangle, the resistance and support position of the formation will be tested several times. After the breakthrough, the price may continue to run in the same direction, up during the bullish market, or down when bears step in.
As shown in the picture above, we can clearly see that the price moves back and forth within the support and resistance level. In this case, we simply need to wait for the price to break through one of the lines and follow the direction of the price movement.
When the price in the downward trend shows a short period of consolidation, the pattern shape is a bearish rectangle.
The reason for this formation is that sellers may need to take a breath before pushing down the price further. In this case, the price falls below the bottom of the rectangular pattern and continues its previous decline. If we set up a Short order under the rectangular support line, we may get a good profit in this trade.
After a round of upward attack, the price trend stops or experiences a short period of consolidation. Here is another type of rectangle shape a bullish rectangle. In the majority of trading cases, the bullish rectangle indicates a continuos upward cryptocurrency price trend.
Traders pay attention to what is the overall trend of the price movement after breaking through the resistance at the top of the rectangular shape. If we set multiple orders above the rectangular resistance line, we may profit during the bullish market.
Please note, that the article is a part of BTCMEX Blog, the views and opinions expressed here are the contributing authors’ only and do not necessarily represent the views of the company.
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