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2. Double Bottom #double
The double bottom is the mirror image of the double top if the mirror was placed at the neckline. It’s a bullish chart pattern that occurs during a downtrend, suggesting a price reversal.
3. Head and Shoulders #CryptoMarketMoves
The head and shoulders chart pattern consists of three close peaks with two smaller peaks on either side (the shoulders) and a higher peak in the middle (the head). It resembles a person’s silhouette from the front, hence the name. Running beneath the two shoulders and the head is a line drawn across the lows.
The head and shoulders pattern occurs in an uptrend and signals a shift from a bullish to a bearish market sentiment. The principle behind it is that buyers are losing momentum. They drive the price up thrice (represented by the peaks in the pattern) but are met with sellers who drive it back down again.
The price breaking below the neckline confirms the pattern. This means that the sellers are now in control and that it might be time to consider selling or shorting the asset as prices could be headed lower.
Beyond the Chart: A Well-Rounded Approach
While technical analysis is a valuable skill, it’s not the only factor to consider. News events, new government regulations, and the overall health of a cryptocurrency project can all significantly impact its price. A well-rounded investment approach considers technical, sentimental, and fundamental analysis.
You also need to study the macroeconomics of the market. Let’s take a very rudimentary example. Let’s say the Federal Reserve is going to have a meeting soon to decide whether to cut interest rates or not. On the day of the meeting, you find out that the Fed has cut interest rates. This will encourage spending, stimulate the economy, and drive asset prices up. You look at the charts and confirm that there is a lot of buying activity. You can now go long at much less risk than before the meeting.
The market is a prediction mechanism that you can use to predict where the price is going to be in the future. One massive thing in trading.
The double bottom is the mirror image of the double top if the mirror was placed at the neckline. It’s a bullish chart pattern that occurs during a downtrend, suggesting a price reversal.
3. Head and Shoulders #CryptoMarketMoves
The head and shoulders chart pattern consists of three close peaks with two smaller peaks on either side (the shoulders) and a higher peak in the middle (the head). It resembles a person’s silhouette from the front, hence the name. Running beneath the two shoulders and the head is a line drawn across the lows.
The head and shoulders pattern occurs in an uptrend and signals a shift from a bullish to a bearish market sentiment. The principle behind it is that buyers are losing momentum. They drive the price up thrice (represented by the peaks in the pattern) but are met with sellers who drive it back down again.
The price breaking below the neckline confirms the pattern. This means that the sellers are now in control and that it might be time to consider selling or shorting the asset as prices could be headed lower.
Beyond the Chart: A Well-Rounded Approach
While technical analysis is a valuable skill, it’s not the only factor to consider. News events, new government regulations, and the overall health of a cryptocurrency project can all significantly impact its price. A well-rounded investment approach considers technical, sentimental, and fundamental analysis.
You also need to study the macroeconomics of the market. Let’s take a very rudimentary example. Let’s say the Federal Reserve is going to have a meeting soon to decide whether to cut interest rates or not. On the day of the meeting, you find out that the Fed has cut interest rates. This will encourage spending, stimulate the economy, and drive asset prices up. You look at the charts and confirm that there is a lot of buying activity. You can now go long at much less risk than before the meeting.
The market is a prediction mechanism that you can use to predict where the price is going to be in the future. One massive thing in trading.
