3 Crypto Chart Patterns to Help Make Sense of the Market

So a Horizontal Level Breakout has about the same chance of success on a daily (1D) interval as it does on hourly (1H) interval. Chart patterns often have false breakouts, therefore, traders can increase their success by confirming breakouts with other indicators (RSI, MACD, etc.) or even a simple volume trend. The handle should resemble a bull flag, in which the price appears to be heading in the opposite direction of the current trend. This is usually followed by continuation and a breakout from the bottom of the handle. A wedge pattern can be spotted on a chart by looking for two parallel lines converging over a period of time. Crypto trading patterns have different uses, but the key purpose of the higher highs and lower lows pattern really is to identify the general trend a cryptocurrency is moving in.

If you are going to trade, it’s important that you learn some trading jargon. That is because there are a lot of terms that you need to understand trading patterns. If you want to learn how to read and understand crypto charts, take our TA training course, which includes a demonstration from our Senior Analyst.

Bearish Flag

Gaps differ from traditional crypto trading patterns drawn with lines. Wedge crypto trading patterns can be continuation or reversal patterns. However, a wedge is identified by the fact that both trendlines are advancing, either upward or downward. The descending triangle is a bearish continuation chart pattern with a horizontal support line and a descending resistance line. Therefore, a breakdown will occur in the trend, signaling a downward trend in price.

• Support levels are price levels where demand is expected to be strong, while resistance levels are price levels where supply is expected to be strong.
• I am sure now you will be able to use all these trading patterns and see how these patterns will optimise your overall trading experience and help you skyrocket your profits.
• When it comes to crypto trading, there are a variety of different chart types you can use to identify potential trading opportunities.
• The following trading strategy will help you detect a crypto descending triangle and show you how to make money on descending triangle chart.

For instance, the morning star is a combination of a bearish candle, followed by a doji and then a bullish candle. This candlestick combination is interpreted as a trend reversal signal from bearish to bullish. Aside from single-candlestick patterns, there are other candlestick combinations that you can use to project possible price movements. For our first example of a bearish candlestick pattern, let’s recall the hammer.

Crypto Chart Pattern Success Rate

Different crypto patterns will work better depending on the asset, so it is important for investors to know how each chart pattern applies to their specific situation. Bullish candlestick patterns form at a market downturn and signal that the price of an asset is likely to reverse. Which would lead a trader to consider opening a long position and profit from an upward move. Whereas bearish candlestick patterns are seen at the end of an uptrend. Which lets traders know that the price of a crypto is at a heavy point of resistance and that price may fall due to buyer exhaustion. Many novice crypto traders get confused between crypto chart patterns and the typical candlestick patterns.

• The inverted hammer candlestick looks like a shooting star candlestick, but it is bullish instead of bearish, as shown by its green colour.
• A candlestick is the main price indicator in most crypto price charts.
• A breakout is identified when there is a definitive breach of the key level and it is presented together with a target level where one can expect the price to move towards.
• In short increments of a price reversal, the pennant-like formation of the pattern will appear.

Following a bullish trend, the price encounters resistance and finds support quickly after. The price difference between the two lines is 3%, which is the expected target for taking profit. The following trading strategy will help you detect a crypto descending triangle and show you how to make money on descending triangle chart. Once the – price breaks out of the bullish ascending triangle, taking profit at ~$2000 above the breakout ensures maximizing profits before an eventual price downturn. You can use the opening of the ascending triangle as a projection price target for the breakout. In our example, the price difference at the crypto triangle pattern opening is ~$2000.

Triple Bottom

In short increments of a price reversal, the pennant-like formation of the pattern will appear. A double top is a very common pattern and indicates a reversal in price direction. As the price reverses, it finds its first support (3) which will also form the basis for a horizontal line that will be the support level for the rest of the pattern.

• Given that Pepe coin has exhibited a similar pattern over the last six days, it indicates a potential continuation of its bearish trend.
• The downtrend resumes after breaking out of the flag formation at 8.
• The cup and handle is a pattern that can be observed when the price of an asset reaches a certain level and then pulls back before reclaiming that level.
• This is because the pattern indicates that a trend is reversing from bearish to bullish, hence, the cup.
• It forms a U shape that resembles a cup and is accompanied by a short downward trend that makes up the handle.
• Therefore, a pattern that develops on a daily chart is expected to result in a larger move than the same pattern observed on an intraday chart, such as a one-minute chart.

These appear when bullish traders get rejected at the same resistance level on multiple occasions but retreat less after each attempt until eventually, the price breaks through. The same goes for descending patterns, where sellers eventually overcome a base support after a number of pushbacks and prices continue lower. Flag patterns have two parallel trendlines that can slope up, down, or sideways.

Mock Trader

A flag formation emerges as the price bounces between two trend lines sloping downwards. A triple top is a reversal pattern that occurs when an uptrend hits a resistance level and reverses to meet a support level. This sequence repeats itself two more times before breaking below the support to initiate a bearish trend. The bullish rectangle indicates the continuation of an existing bullish trend. It forms when an upward trend encounters resistance and reverses to meet a support line that sends it back up. This sequence is repeated one or two times until a breakout happens at resistance.

Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility. All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets.

Support / Resistance

Individual candlesticks form candlestick patterns that can indicate whether prices are likely to rise, fall, or remain unchanged. This provides insight into market sentiment and potential trading opportunities. Candlesticks are a type of charting technique used to describe the price immediate edge movements of an asset. First developed in 18th-century Japan, they’ve been used to find patterns that may indicate where asset prices have headed for centuries. Today, cryptocurrency traders use candlesticks to analyze historical price data and predict future price movements.

• A bullish harami is a long red candlestick followed by a smaller green candlestick that’s completely contained within the body of the previous candlestick.
• A bearish flag is the complete opposite of a bullish flag crypto chart pattern.
• However, the flag pattern tells us that this downtrend is only momentary and that the uptrend will once again resume, which is what ends up happening in the chart above.
• Rectangle pattern trading is done within a trend, where the price remains between two horizontal support and resistance lines.

Some are more prevalent than others, and some are more likely to result in a successful trade prediction than others. The pattern completes when the price movement reverses, moving downward (5) and breaking out of the (inverted) cup and handle formation. The pattern completes when the price movement reverses, moving upward (5) and breaks out of the cup and handle formation.

Evening Star Pattern

Support levels are price levels where demand is expected to be strong, while resistance levels are price levels where supply is expected to be strong. Imagine you are tracking the price of an asset like a stock or a cryptocurrency over a period of time, such as a week, a day, or an hour. However, some trading patterns work better with different trading strategies. And some trading patterns work better with short or long time frames.

It is characterized by the price shooting up twice in a short period of time — retesting a new high. If it fails to go back to that level and cross over the upper horizontal line, it typically signifies that a strong pullback is coming. In technical analysis, chart patterns are a set of recurring shapes that – can be drawn on an asset’s chart by connecting price highs and lows. The rectangle chart pattern is a classical technical analysis and is among the most prevalent crypto chart patterns in the trading world. This pattern is described by horizontal lines showing a high level of support and resistance.

Bearish Single-Candlestick Patterns

When you add this indicator to a price chart with the triple bottom pattern, you’ll be expecting a crossover at the exact level where the price breaks the resistance neckline. The triple top pattern consists of three peaks, which signal that the asset may no longer be rising at a high rate and that lower prices may be on the way. The Rectangle chart pattern is a type of price pattern as well, like the triangle chart pattern. Let me explain how to identify this pattern and how you can bring it to your benefit.

However, the flag pattern tells us that this downtrend is only momentary and that the uptrend will once again resume, which is what ends up happening in the chart above. Let’s have a look at an example of a rectangle chart pattern and how to trade it. Our GoodCrypto app offers all the necessary tools on how to find patterns in day trading charts. It’s the perfect app for pattern trading as it provides a wide array of versatile tools for drawing a pattern in a chart. In this section, we provide you with the necessary knowledge on how to look at patterns for trading and use GoodCrypto to draw your own.

Bearish Rectangle

Candlestick patterns are generally categorised into bullish and bearish patterns. A bullish pattern generally indicates future positive price movement for an asset, which may incite a trader to buy in anticipation that the token will increase in value. The inverse happens with a bearish pattern, which may incite some traders to sell before the potential downwards price movement. It is worth noting even during busy trading periods, no chart pattern is 100% reliable. You can recognize pennant patterns by two trendlines, one downward trendline and one upward trendline, that eventually converge. They resemble asymmetrical triangles; however, pennants are short-term patterns, unlike triangles.

• In technical analysis, chart patterns are a set of recurring shapes that can be drawn on an asset’s chart by connecting price highs and lows.
• As the price moves up, it meets a resistance level which sends it back down.
• When all three peaks point downward, it’s known as a bullish inverse head and shoulders pattern and suggests a new uptrend is about to begin.
• The good news is you don’t necessarily need to have a great deal of crypto trading experience to be able to spot these patterns.
• A bullish trend happens when the market is moving upwards sharply while a bearish trend happens when the market is moving downwards sharply.

The inverted hammer pattern indicates that there was substantial buying pressure followed by some sell pressure. Using the same chart from the above example, we inserted the MACD to get another signal for a trend reversal. You will see the MACD crossover has occurred when the price reaches the resistance line and, therefore, helps us confirm the trend reversal.