There is no ‘best’ chart pattern for Bitcoin trading, because they are all used to highlight different trends in a huge variety of markets. But before getting into the elaboration of different chart patterns, it is important that we briefly explain support and resistance levels. Support refers to the level at which an asset’s price stops falling and bounces back up. Resistance is where the price usually stops rising and dips back down.
Often, chart patterns are used in candlesticks trading, which is slightly easier to see the previous opens and closes of the market. Some patterns are more suited to a volatile market, while others are less so. Some patterns are best used in the bullish market, and the others are best used when a market is bearish.
Pennant is created when there is a significant movement in the market, followed by a period of consolidation. This creates the pennant shape due to the converging lines. A breakout movement then occurs in the same direction as the market move.
A double bottom is formed by a prior downward trend. It is a bullish reversal pattern, because it signifies the end of a downtrend and a shift towards an uptrend. This indicates a period of selling, causing an asset’s price to drop below a level of support. It will then rise to a level of resistance, before dropping again. Finally, the trend will reverse and begin an upward motion as the market becomes more bullish.
A double top is formed by a prior upper trend, the formation of the first peak, a trough, a rise to a second peak and a reversal and break of prior support. A double top is another pattern that traders use to highlight trend reversals.
4-Head and Shoulders
A head and shoulders is a chart pattern in which a large peak has a slightly smaller peak on either side of it. Traders look at head and shoulders patterns to predict a bullish-to-bearish reversal. In this pattern the support line is known as the ‘neckline’ and the downtrend is confirmed when the neckline is broken.
A triple top chart pattern is one of many reversal patterns that visually represents the changing of the control of the trend. It is a reversal trading strategy that gives you the opportunity to be part of a new trend right from the beginning.
The perfect looking triple top reversal is composed of the three peaks at nearly or the same price levels without the market being able to break through it. The third peak or the third reaction of the resistance is an indication of selling interest is outweighing buying interest and the trend is in the process of reversing.