cryptocurrency Chart patterns are important trading tools and integral parts of technical analysis. Whether you are a professional or a beginner in the world of cryptocurrency trading, you need to be proficient in cryptocurrency Chart patterns to be able to accurately discern market trends and accurately predict possible price movements.
These patterns often create specific shapes that can indicate the likelihood that the trend will continue or return. Correctly recognizing the graph pattern is a valuable ability that can help you excel in the tight competition of the cryptocurrency world.
Of course, it is not enough to just get acquainted with these patterns, to be able to use them effectively, you need to become fully acquainted with them and apply them on a practical level. also, please read cryptocurrency trading signals in the blog.
What is a graph pattern in the cryptocurrency Chart?
A cryptocurrency Chart pattern is a shape in a price chart that helps you predict future behaviour based on how the price has behaved in the past. In other words, the basis of price patterns is the repetition of history, and if the price of an asset has consistently shown a constant behaviour in the past, it will most likely show the same behaviour in the future.
Graphical patterns are the basis of technical analysis and can be very effective; Provided that the trader knows exactly what he is looking for and what he is looking for when examining price charts.
What is the best graphic pattern cryptocurrency Chart?
None of the cryptocurrency Chart patterns can be considered the best because each of them is used to show different trends in a wide range of markets. Graphic patterns are often used in candle charts; This is because candlestick charts help traders to see the opening and closing prices of trades in a certain period a little easier.
Some patterns are more suited to volatile markets, while others are less effective in such markets. Some patterns are better used in bullish markets, while others are better for bullish markets.
However, it is important to know the “best” cryptocurrency Chart pattern for the “specific market” in which you operate; Because if you use the wrong pattern or do not have enough information to choose the right pattern, you will lose the opportunity to make a profit.
Define levels of support and resistance
Before going into the details of the various graphic patterns, it is best to take a brief look at the concept of “levels of support and resistance”.
The level of support is the level at which the price of an asset does not fall further and rises again as it approaches or contacts it. The resistance level is also the level at which the price often stops rising and the value of the asset starts to fall after hitting it.
The reason for the formation of support and resistance levels is the balance that is created between buyers and sellers, or in fact supply and demand. When there are more buyers in the market than sellers (or there is more demand than supply), the price often goes up. Conversely, when the number of sellers exceeds the number of buyers (supply exceeds demand), prices usually fall.
Types of graphic patterns in cryptocurrency Chart
Graphical patterns are generally divided into three categories: “continuous patterns”, “recurring patterns” and “two-sided patterns”.
- Continuous patterns indicate the continuity of the trend;
- Return patterns indicate the possibility of trend reversal;
- Bilateral patterns signal volatile and volatile markets; A market in which the price may move in any direction.
If you have a thorough understanding of all these types, you can use all three of them to get into short and long positions. In other words, these patterns help you to predict the price trend and even trade and make a profit in the downtrend markets, such as the uptrend markets.
Of course, the most important thing to keep in mind when using cryptocurrency Chart patterns as part of your technical analysis is that these patterns are not a guarantee that the market will move in the expected direction; Rather, they are mere signs of something likely to happen.
With all this information in mind, we can look at 10 important technical analysis patterns that all traders should be familiar with.
Head and shoulder pattern
(head and shoulders) is a graphic pattern in which we have a high peak and two slightly shorter peaks on either side. The head and shoulders pattern shows the probability of the end of the uptrend and the beginning of the downtrend.
So it is clear that this pattern is recursive. In the head and shoulder pattern, the first and third peaks are usually shorter than the second peak, but what they have in common is that all three deal with a level of support (called the neckline, confirmation line, or brake line). When the price returns to the same level of support from the third peak, we should probably wait for the neckline to break and start a downward trend.
The pattern of the two peaks
The double top pattern is another pattern traders use to characterize trend reversals. The two-peak pattern occurs when the price rises to a certain level and then falls; It then rises again to the same level of resistance and falls again to the previous level. In such a situation, there is a possibility of starting a very strong downtrend.
The pattern of the two valleys
The double bottom pattern is exactly the opposite of the two-peak pattern. In this pattern, the price goes down to a certain level of support and goes up again. It then decreases again to the same support and rises to the same resistance (neckline). In such a situation, we should probably expect a strong uptrend. Therefore, the pattern of the two valleys is also recursive; With the difference that it shows the end of the downtrend and the beginning of the uptrend. That is why it is called an ascending return.
The pattern of the floor
The rounding bottom pattern, or semicircle, often represents the end of a downtrend and the beginning of an uptrend. This reversal pattern is usually formed after a long downtrend and indicates that the downtrend is coming to an end and we can wait for the uptrend to begin.
In the image below, you can see an example of a floor pattern. In this example, the price of an asset is on a downward trend. However, after creating a spherical pattern, the trend returns to continue moving in an upward direction.
Traders often tend to invest and buy at two points in this pattern: when the price is close to the bottom of the cryptocurrency Chart and when the trend continues and has crossed the resistance level.
The wedge pattern is formed when asset price movements are compressed between two diagonal trend lines. In general, there are two types of angle patterns: rising angle and decreasing angle.
Incremental corner pattern
An incremental angle pattern is formed around the trend line that goes upwards between the two support lines and the diagonal resistance. In this case, the slope of the support line is steeper than the slope of the resistance line. This pattern generally indicates that asset prices are likely to break the support level and fall sharply.
Decreasing angle pattern
A decreasing angle pattern is formed between the two levels of resistance and downward oblique support. In this case, the slope of the resistance line is steeper than the slope of the support line. Unlike the previous type, the downtrend indicates that the price will most likely break the resistance and enter an uptrend. As you can see in the example below, the price trend has broken the resistance and returned to the uptrend after being in the lower corner.
Incremental and decremental angles are considered return patterns. An uptrend indicates the possibility of a downtrend, and a downtrend indicates an uptrend.
Cup and handle pattern
The cup and handle pattern is a continuous pattern and a combination of two floor and corner patterns that are formed in the ascending market and announces the continuation of the ascending trend. The pattern of cups and handles shows short periods of downtrend in the uptrend market, while the general trend after the creation of this pattern will continue in an uptrend.
In this pattern, the cup resembles a floor pattern and the handle resembles a corner diagram.
After creating a spherical pattern, the price will probably go through a period of temporary correction known as batching. The reason for this naming is that the correction process is limited to two parallel lines drawn in the diagram above. Finally, the asset comes out of its short correction period (batch) and continues the upward trend.
A pennant or flag is formed when an asset enters a period of price stabilization after going through an uptrend or downtrend. The general concept of the flag pattern is that this is a temporary price stabilization period and the trend will return to normal. Therefore, the flag pattern can be considered a continuous pattern.
Flag patterns show a short pause in an active market. One of the necessary things to create a flag pattern is that before they occur, there is a rapid movement in the form of a straight line in the market, which we call the flagpole. Then the market enters a short pause in the flag section, the so-called rest, to start moving in the same direction again.
The pattern of the flag can be both ascending and descending. For example, in the cryptocurrency Chart above, you can see the pattern of the descending flag. As you can see, the price has been declining from the beginning. Then we saw a period of price stabilization that took the form of interconnected flags, after which the price continued to decline again. The same thing can be seen in uptrends.
The flag pattern and the corner pattern may look very similar at first;
But if you look more closely, you will see that these two patterns are completely different. The first difference is that the corner pattern is always ascending or descending, while the flag pattern is always in the horizontal position. If you look at the pattern of the flag in the chart, you will see that the price trend in this period is neither ascending nor descending, but is horizontal. In addition, the flag pattern is continuous, while the corner pattern is a recurring pattern.
Ascending triangle pattern
The ascending triangle is a continuous ascending pattern and indicates that the trend is likely to continue. The pattern of the ascending triangle is drawn by drawing a horizontal line of resistance along with the swing highs as well as a diagonal line of support along with the swing lows. In the image below, you can see that the resistance line is a horizontal line that connects the oscillation ceilings. You can also see the support line that connects the fluctuation floor with a positive slope. The combination of these two lines has created a shape similar to a triangle, which in the trading world is called an ascending triangle.
The ascending triangle pattern shows the continuation of the ascending trend. As you can see in the image above, the trend continues to rise and breaks its resistance.
Descending triangle pattern
The descending triangle is also a continuous pattern, with the difference that it is formed in descending trends and shows the continuity of the descending trend. Therefore, this model can be used to enter short positions and make a profit from declining markets.
As you can see in the image below, the resistance line that connects the oscillation ceiling is a descending line, while the support line is horizontal. The combination of these two lines has created a triangle, which in the trading world is called a descending triangle.
As mentioned, the downtrend triangle indicates the continuation of the downtrend. In the picture, it can be seen that the trend has finally broken its support and has fallen below it. This shows that the sellers have dominated the market and the probability of a return to the trend is very low.
Symmetrical triangle pattern
The symmetrical triangle pattern is also a continuous pattern with two types of ascending and descending, which means that after the formation of the pattern, the trend often continues in the same direction. The only difference between this pattern and ordinary triangle patterns is the shape of the triangle that is created in them. A symmetrical triangle is something like an equilateral triangle, while in previous patterns we saw a kind of right triangle.
In terms of functionality, this template is no different from previous templates. In the diagram below you can see the symmetrical triangle pattern. As you can see, the trend has been bullish from the beginning. Then we see a symmetrical triangle that stabilized the price and after that, the price returned to its upward trend. The descending symmetric triangle is formed by the same definition but in descending trends.
What is a cryptocurrency Chart?
In general, cryptocurrency Charts are charts that show the rate of price increase, stock growth, stock decline and all stock performance over some time.
Using the chart, in addition to being able to know the status of the cryptocurrency from the past to the present, it is also possible to analyze the cryptocurrency chart to predict the future of the currency, which to do, ie Analyzing the future of the currency based on its chart requires knowledge and experience in this field.
Cryptocurrency Chart are in two scales, which are: logarithmic scale and arithmetic scale
Because on an arithmetic scale, as the price increases, the distance between the numbers remains constant, analysts use the arithmetic scale more to do what they want. But logarithmic scales are such that the higher the price, the smaller the distance between the numbers.
Regarding logarithmic charts, we should point out that in these charts, equal distance represents the percentage of equal change in price. For example: in these cryptocurrency Charts, the distance between ten and twenty is equal to the distance between twenty to forty or forty to eighty.
What are the types of cryptocurrency Charts?
There are several types of charts used in the foreign exchange market:
- Bar graph
- Linear graph
- Candle chart
The bar chart shows the price changes during the day and can be used to identify the first price, the highest price, the lowest price and. Bar charts are very common among analysts and are widely used.
Line charts are bar charts, but the only difference is that they can be closed at a price that is connected using a single line.
Charts or cryptocurrency Charts are Japanese versions of bar charts and have become very popular in recent years. These cryptocurrency Charts are also known as candlesticks, but the way they are displayed is different from other charts.
In the candlestick chart, the green charts show the price rising and the red charts show the price falling during the day.
Check the volume of transactions using cryptocurrency Charts:
One of the applications of the cryptocurrency Chart is the possibility of examining the volume of transactions made with the desired cryptocurrency. The volume of transactions means the amount of buying and selling of the desired currency in one day, which is shown with candlestick and bar charts.
Examining the volume of trades, if the height of the lines is higher, it indicates that more traders have been done in one day, and if the specific height of the chart is lower, it means that the trades are less in one day.
The best indicator of technical analysis of cryptocurrency; Training of indicators and oscillators
There are different types of indicators and oscillators of technical analysis, which we teach the best and most accurate indicators in the field of cryptocurrency such as bitcoin.
Analysts use indicators to better understand price behaviour in the cryptocurrency market. The indicator is easily analyzed and alerts and buy and sell signals can be easily used. In technical analysis, the number of indicators is very high and people who trade daily or use price fluctuations to make a profit, as well as those who intend to buy long-term and invest in the cryptocurrency market, can use these indicators.
What are the most accurate indicators of cryptocurrency technical analysis?
The efficiency of the index in technical analysis is such that some traders and market analysts write their indicators and use them to buy and sell. In this article, we are going to introduce some of the most important and accurate types of indicators used in the cryptocurrency market.
RSI Indicator Relative strength in technical analysis
The RSI indicator is an oscillator that determines the strength of the buyer and seller in the market. This indicator shows the relative strength of the market by considering the closing price of the cryptocurrency in a certain period by default of 14 days. This slot fluctuates between zero and one hundred.
this indicator represents the Momentum of the market and shows it in the price changes and the market price trend. In other words, when momentum and price are rising together, it indicates the high strength of the uptrend, and this momentary increase in the market indicates that traders are still buying it.
Conversely, when the price rises but the momentum is falling, it indicates a weakening uptrend and signals the end of the current uptrend in the market.
Classically, the RSI indicator has two ranges a sell-saturation and a buy-saturation zone. When the relative strength index number is greater than 70, the market is said to be in the buying saturation range. Also, when the numerical value of this indicator is less than 30, it is said that the market is in the saturation range.
For example, the closer the relative strength indicator is to its ceiling (100) and floor (zero), the more the current trend will end and the trend will change, or the pullback to the resistance and support levels will fail and the current trend will continue.
In any case, a high number of this indicator indicates a price correction or reversal of the trend. However, trading and buying and selling only according to this indicator is not the right way. Because like other indicators and tools in technical analysis, the RSI indicator has an error. Therefore, the correct method is to use this indicator along with other tools. The combination of several indicators reduces the analysis error to a great extent.
Moving Average in cryptocurrency chart
Moving Average is an indicator that shows price changes in a modified form by taking the average price over a while. Using this index, the price trend can be easily determined. Because this indicator uses price data in the past, it is a backward indicator. Simple Moving Average SMA and Exponential
Moving Average EMAs are the most widely used moving averages.
SMA and MA show the average price over some time. For example, the simple 10-day moving average or SMA-10 calculates the average price over the last 10 days and displays it.
The EMA, on the other hand, calculates the average price over a given period at a higher rate than in recent days. As the period of this index increases, the changes of the indicator about the price will be slower and more delayed. For example, the 200-day moving average is lower than the 50-day moving average.
Traders use this indicator more as a tool to monitor market trends. For example, when prices fluctuate above the 200-day moving average for some time, major traders consider the market trend to be bullish.
Another use of this indicator is to use two moving averages with different periods and consider their intersection as a signal for buying and selling. For example, when the 100-day moving average breaks the 200-day moving average and moves below it, Death Cross is a sell signal. On the other hand, the opposite move can be considered a sign of a rise in the price of the Golden Cross.
MACD in Technical Analysis in cryptocurrency chart
The MACD is also a tool for momentarily identifying the market using two moving averages. This indicator consists of two lines: MACD Line and Signal Line. The Mackay line is the difference between the 26-day moving average and the 12-day moving average, and the signal line is the 9-day moving average of the MacD line itself.
The MACD indicator also uses a histogram, which is the difference between the MacD line and the signal line. One of the uses of this indicator is to observe a divergence between price and indicator, which is generally a strong sign of a change in market trends. Another application of this index is to observe the intersection of two moving average lines. The intersection of the MacD line and the signal line in the MACD indicator, as in the case of the moving average, is a sign of a market uptrend.
The MacD and RSI momentum indicators calculate the market but in two different ways. Therefore, the simultaneous use of these two indicators can greatly reduce the error.
Stochastic RSI or Stochastic RSI
The Stock RSI indicator is also an oscillator for calculating market momentum. In this indicator, like RSI, there is a range of buy saturation and sell saturation that can be used. This index is derived from the relative strength indicator, with the difference that the RSI indicator information is used to calculate it instead of using price information.
Due to the faster changes of this indicator compared to RSI, it gives us more buying and selling opportunities. Usually, the most use of this index is when it is in the saturation range of sales. In this indicator, the range above 80 is called the buy saturation range and the range below 20 is called the sell saturation range. A stock RSI of zero also means that the RSI indicator is at its lowest point in the specified period (usually 14). On the other hand, the stock RSI 100 indicates that the RSI is at its highest.
Putting the RSI stock index in the buy and sell saturation range does not mean a reversal of the trend (as we had in the RSI indicator), but indicates that the cryptocurrency chart RSI indicator is approaching its buy or sell saturation range. Also note that the stock RSI indicator has a lot more changes compared to the RSI indicator, and therefore the error signals in it are more than the RSI indicator.
Bollinger Bands in Technical Analysis in cryptocurrency chart
The Bollinger Bands Indicator measures market fluctuations. This cryptocurrency chart indicator consists of three lines. The middle line is a simple moving average, with one line at the top and one line at the bottom of the moving average. These two top and bottom lines, or the Bollinger Bands, are the standard deviation of the moving average (midline).
As price fluctuations and changes increase, the distance between these bands changes and these lines move closer or farther apart. If the price approaches the upper band of this cryptocurrency chart indicator, it means that the price is in the saturation range of buying and the price approaching the lower band indicates that the price is in the saturation range of the sale. Breaking the bands of this indicator is very rare, in which case it shows the strength of the current market trend.