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Intermediate Guide Predicting Market Direction with Chart Patterns

Discussion in 'Intermediate Level' started by xyzzy, Sep 5, 2017.

  1. xyzzy

    xyzzy Master of None Staff Member Super Admin

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    Recognizing chart patterns as they are unfolding is another useful tool that allow advanced traders to make confident predictions on the direction of the market. Since there are only two possible directions of markets (up or down), we classify patterns as continuation or reversal patterns. That is, whether they signal a continuation of the impulse or indicate a coming correction.

    Now, here we are classifying each pattern as either typically continuation or reversal patterns. In reality, many patterns can be both depending on the conditions.

    Continuation Patterns

    Cup and Handle
    The Cup and Handle is a bullish continuation pattern. The "cup" portion consists of downward trend followed by an upward trend, much like a rounding bottom. Typically the price at the beginning and end of the cup should be comparable. Once the cup is complete, a short term downward impulse followed by another reversal forms the handle of the cup. After completion of the handle, it is expected that an upward trend will continue, resulting in a breakout to new highs.

    upload_2017-9-5_9-12-27.png

    Triangles

    Triangles are common and frequently occurring patterns, and though we are listing them as a continuation pattern, they can be either a continuation or reversal. There are multiple types of triangles: symmetrical, ascending, and descending triangles. A symmetrical triangle signals that breakout is likely going to occur, but could go up or down. However, an ascending triangle indicates a positive breakout, and a descending triangle indicates a negative breakout. Ascending/descending triangles are continuation patterns.

    upload_2017-9-5_9-2-14.png
    Channel
    A Channel is created when two trend lines, drawn at the support and resistance levels, run parallel to each other. The market price will bounce up and down between the upper and lower bounds of the channel until a breakout occurs. They can slope upwards (bullish), downwards (bearish), or sideways.

    upload_2017-9-5_9-21-18.png



    Reversal Patterns

    Head and Shoulders
    The Head and Shoulders is a reversal pattern that is made up of three peaks. The highest peak is the head, sitting in the middle of two roughly equal lower peaks, which are the shoulders. This pattern is actually pretty reliable for signaling that a trend is reaching the end of its life and a correction is imminent. In general, the Head and Shoulders pattern indicates a bullish-to-bearish reversal.

    upload_2017-9-5_9-28-2.png

    Double and Triple Tops/Bottoms

    Double and Triple Tops/Bottoms occur when the market price reaches the same support or resistance level twice (double top/bottom) or three times (triple top/bottom). This pattern is also a pretty reliable indicator that a trend reversal is imminent.

    upload_2017-9-5_9-30-43.png
    -----

    This is by no means an exhaustive list but it is a great starting point that can take you pretty far. Any patterns that you think are useful and you'd like to add?
     

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  2. Sean Louk

    Sean Louk Scholar Premium Member

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    Patterns have always confused me. They rarely ever look so obvious...
     
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  3. cryptocat

    cryptocat Beginner

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    Nice post. Based on this, I'm seeing a Head/Shoulders reversal correction of BTC coming. We'll see...
     
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  4. David Johnson

    David Johnson Beginner

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    This is a 2 min video on two tips to predict coin price surges and how to get in on it before they happen
     
  5. johnrickdalaygon

    johnrickdalaygon Contributor

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    This is how they predict the price indicators of the crypto. This is helpful to us but this is a little piece of information for me. All we need is the technique on how to trade coins, including where to sell and where to buy. If there is a post in this forum that I missed based on my needed please refer me into that link. Thank you by the way admin for advising us in here.
     
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  6. CryptoRyuzaki

    CryptoRyuzaki Scholar

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    Thanks for taking the time in explaining these patterns @xyzzy !
     
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  7. profitboss

    profitboss Beginner

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    Really good tutorial , I have some more homework to do now.
     
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  8. Jayko

    Jayko Scholar

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    In my years of cryptocurrency expedition, I have begun to notice that around this time of year, most coins tend to drop in price exponentially, then raise back up in the fall.. Has anyone else noticed this?
     
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  9. russel123456

    russel123456 Contributor

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    awesome news
     
  10. Innate

    Innate Contributor

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    Great news. Thank you for updating the topic and adding new information. I think that the activity on the forum will increase among the participants. ;)
     
  11. WILL Testament

    WILL Testament Contributor

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    Always useful
     

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