Successful crypto trading is often dependent on the use of tools like chart patterns, which help. While there’s no perfect tool for trading and determining possible market movements, chart patterns provide you with pretty accurate indicators.
For instance, head and shoulder patterns are known for an accuracy rate that’s over 80 percent. That’s huge in the trading world. This is why we want to provide you with those chart patterns we think provide the best results for trading.
The idea is to show you how to identify them, use that information to execute successful trades and make decent profits on your investments.
Head & Shoulders Pattern
This pattern is popular for its ability to provide the most accuracy. A classic chart always indicates a market reversal and shows that inability of a trend to move further upwards. Uptrends for the most part are indicative of consistently higher highs and lows.
When the Head & Shoulder chart pattern kicks in, you’ll observe the last trend wave failing to return to the higher highs and lows, triggering a downtrend in the process. You can also detect the beginnings of an uptrend thanks to the Inverse Head & Shoulder.
Whatever the case, this is considered one of the most reliable and popular chart patterns used by traders. Because it is primarily based on trend trading, it is pretty simple and straightforward in its functions, making it one of the easiest to learn.
Learning this is pretty straightforward. Simply head over to Google or YouTube and do a search for it. You’ll find all the training materials you need to learn and understand it.
Bull Flag Pattern
Rightly named the Bull Flag Pattern, this is great for those who like trading bullish trends. It got its name from the reaction a bull has when you wave the red flag in front of it –charges towards the flag and its holder.
This is not surprising seeing as it’s considered the best for trading those trends. Bull patterns are often frequently called wedge or pennant and is often evident when there’s a consolidation phase after a pretty solid uptrend.
Whenever this shows up, the indicators point to the fact that market is getting ready for another uptrend.
People who have been trading the trend from the beginning will find this the perfect indicator for recouping and making a lot of profits, while those who are just entering, can take strong positions in anticipation of the upcoming uptrend and make their profits.
Cup and Handle Pattern
If you been trading the stock markets for a while, then you’ve heard of the Cup and Handle pattern. While it was originally proposed for the stock markets, it appears to have worked well with other trading markets like commodities, forex and now cryptocurrency.
The Cup and Handle pattern typically spans 1-6 months in traditional markets. But in crypto where the pace is faster, traders often see this happen in half that time i.e. 1-3 months. While it’s not as reliable as the first two, it can do a pretty good job of being indicative of a growing trend.
The best way to read this pattern is to take note of a growing trend in trading volumes close to the Handle’s end. Traders can then enter the market just as the price starts breaking into a high.
Understanding this chart pattern is pretty simple. Just think of the base of the cup as the bottom low, and the handle as the higher low.
Once it moves into the higher low, you know that an uptrend has started, so you can then get in and hold your position, riding the wave to the highest prices.
This shares some traits with the Bull Flag pattern. In this instance, you will notice the price remaining stable in between two imaginary lines on the chart. Reliability of this pattern is dependent on how frequently the outer lines are touched by the price.
The reason this isn’t as reliable as the first three is that traders often have to wait and study it to know when to get in, which can make it a somewhat difficult thing.
The good news though, is that once identified, it is often easy to predict the break out price. The best time to trade this would be when the price is when the price of the currency is near the bottom end of the rectangle.
Whatever the case, you need to be careful about how you use these to your benefit. If you are in doubt, always remember that it’s always better to be cautious than careless.