Chart Pattern is one of the most powerful “weapons” in technical analysis. These price models provide a lot of information about the market in a certain period. There are many types such as the head and shoulders model, symmetrical triangle model, and wedge model… Below, Crypto Trading will help you learn about the top 8 chart patterns and how to identify them.
Understand what a Chart Pattern is? Why are price models important in coin trading?
Chart Pattern also known as Price Pattern, price pattern, or price model, is the price chart of assets in the market.
These price models will simulate any price movement. Specifically the buying and selling of an asset over a certain period.
Many traders believe that market prices fluctuate without any rules, but reality has shown the opposite. That is, the price change will repeat if the market has similar fluctuations. From there, price models with similar shapes will form.
Through Chart Pattern and historical data, traders can predict the next trend and have reasonable order orientation.
For example, in the past, when there was bad news about politics, the price of BTC fluctuated and created a head-and-shoulders pattern. At present, traders see this pattern appearing on the chart. Thus, past price actions can be repeated. Prices can increase – or decrease according to the scenarios that happened in the past. Thus, traders will also have effective trading data, giving potential signals.
Similar to the VSA method, analyzing these price patterns will rely on trading volume, price difference, and open-close prices to confirm the next trend of the market.
See more: Price action: surprisingly effective trading method
Top 8 Most Popular and Applicable Chart Patterns in the Crypto Market
To trade Crypto, traders can use many Chart Patterns. Of which the top 8 price patterns below are the most used:
Triangle model
This pattern is formed after an uptrend or downtrend and it predicts a pause in the current trend. Identifying characteristics of the Triangle Chart Pattern :
- Formed when there are at least 4 points including 2 upper peaks and 2 lower bottoms.
- The next top is lower than the previous top, the next bottom is lower than the previous bottom and therefore the slope of the support line will be greater than the slope of the resistance line. These two lines converge to the right of the pattern to form a triangle shape.
Ascending Triangle Pattern
The ascending triangle chart pattern appears in the middle of an uptrend. The bottom is pushed higher and higher, showing that buying prices are being pushed up, and the buyers are increasingly dominant. The support line in the pattern is almost horizontal, the resistance line slopes up and converges on the right side of the pattern.
Descending triangle pattern
The Descending Triangle Chart Pattern has a nearly horizontal support line and a downward-sloping resistance line. This pattern forms after a downtrend, indicating that the sellers are gradually gaining the upper hand.
Isosceles triangle model
This pattern has an upward-sloping resistance line and a downward-sloping support line, forming a harmonious symmetrical triangle. This shows that buyers and sellers are in a tug-of-war and it is difficult to predict the price direction.
Cup and handle pattern
This Chart Pattern usually appears in an uptrend. It predicts the continuation of the trend. The shape of the pattern is like a cup with a handle on the left or right. It can also appear in a downtrend, predicting a bullish reversal signal.
Wedge Pattern – Chart Pattern for good trading signals
The wedge pattern is also one of the price patterns used by many traders. This pattern has a support line below combined with a resistance line above, sloping up or down to form a wedge shape. It can appear after an uptrend or a downtrend.
Head and Shoulders Pattern – Meaningful Chart Pattern
This pattern is quite popular and its shape resembles a W or an inverted W. This is a pattern that signals a trend reversal and it represents a tug-of-war with one side eventually gaining the upper hand.
- Head and shoulders pattern: Appears at the top of the wave when the market is reversing from up to down. It will consist of 3 peaks with the middle peak higher than the other 2 peaks.
- Inverse Head and Shoulders Pattern: Appears at the bottom of a wave when the market reverses from down to up. The middle bottom will be the lowest and the 2 side bottoms will be higher.
Arc model
This type of Chart Pattern is quite rare but it gives quite accurate forecasts. Therefore, along with the head and shoulders pattern, the cup and handle pattern is one of the patterns that is highly appreciated for trading signals. This pattern has 2 variations:
Chart Pattern Arc Peak
You can imagine the bow top pattern as a roller coaster that goes from bottom to top. The price will need a lot of force to surge up and then be pulled back down quickly. The bow will act as support and when the price breaks out of this point, it will become resistant. This pattern can predict both trend reversals and trend continuation.
See more: Open Bybit account – Explore crypto exchange
Chart Pattern Arc Bottom
The arc bottom price pattern is the opposite of the top pattern. The bottom is formed round and beautiful, the bowstring acts as resistance. This pattern predicts that the price will bounce strongly afterward. The price will be tested at the support resistance level twice, showing that the pattern is complete.
Double Top/Double Bottom Patterns – Most Popular Price Patterns
The Double Top/Double Bottom Chart Pattern is a type of trend reversal pattern. It has a shape similar to the letter M (Double Top Pattern) or the inverted letter M (Double Bottom Pattern). When the market has made a bottom or a top, the price continues to adjust down or up but cannot break through the previous resistance/support level. Therefore, when the price rebounds, the market is very likely to reverse.
Flag Pattern
The pointed flag chart pattern is also known as the pennant. This pattern usually appears after a strong trend (up or down). This is an accumulation phase for the price to continue the original trend.
National Flag Pattern – Top Effective Chart Pattern to Use
The Flag pattern looks like a rectangle at first glance. However, this pattern has a flagpole with price movements that are different from the flag. In this pattern, the price will be between two trend lines. It predicts that the price will continue to follow the old trend after a period of consolidation.
In addition to the 8 models above, there are many other Chart Pattern such as the rectangle model, the Ichimoku cloud model, etc. Traders should also integrate other indicators, tools, and price models to increase the accuracy of predictions. At the same time, you should learn more about What is VSA to have more methods of technical analysis of the market.
Conclude
Above is the general content of Chart Pattern in the Crypto market. Crypto Trading will continue to inform you about specific content for each model. Please click to follow and update the latest content for more convenient and effective trading!
FAQs
How are price patterns classified?
Price patterns are divided into continuation price patterns and reversal price patterns, usually, specific pattern patterns have these two increasing and decreasing variations.
Can multiple price patterns be combined for trading?
Usually, in each market fluctuation, a specific pattern will appear. Traders should combine with other indicators such as MA, and RSI, and should not wait for other patterns to appear.
How long will it take for a pattern to form?
Depending on market fluctuations, it can take from a few days to a few months.
