Chart patterns are great ways to anticipate reversals of trends. Other indicators like MACD and RSI can help you figure out more exactly when but identifying chart patterns are a great way to see a reversal coming. The first step is knowing how to draw trend lines. With these you can more easily see how the range of a certain move is changing. If the range is either tightening or widening, the likelihood is that a reversal is coming. Typically, volume will also steadily decrease throughout the pattern, ending in a climax in which the trend reverses. On the chart you can see several types of common chart patterns labeled, bearish in red and bullish in purple.
I always consult Thomas Bulkowski's guide on chart patterns if I am ever in doubt. His observations were for stocks but work really well for cyrptocurrency trading as well. Especially because patterns tend to form a lot more quickly than traditional securities.
Resources:
(1) Rising (ascending) wedge
(2) Bullish pennant
(3) Falling (descending) wedge
(4) Descending broadening wedge
Peace and love,
crypt0guy
I always consult Thomas Bulkowski's guide on chart patterns if I am ever in doubt. His observations were for stocks but work really well for cyrptocurrency trading as well. Especially because patterns tend to form a lot more quickly than traditional securities.
Resources:
(1) Rising (ascending) wedge
(2) Bullish pennant
(3) Falling (descending) wedge
(4) Descending broadening wedge
Peace and love,
crypt0guy
Comment:
I forgot to mention something very important. You can check on how Bulkowski recommends playing these chart patterns, but generally you would do so after the support or resistance is broken following the third touch. However, check with the guide because some patterns with widening ranges like the descending broadening wedge has a recommended low risk entry at the third support touch and not necessarily at the break of the resistance trendline. Good luck!
