View live Ethereum / Bitcoin chart to track latest price changes. Trade ideas, forecasts and market news are at your disposal as well. Apr 14, · The Best Bitcoin Trading Strategy - (Rules for a Buy Trade) Step #1: Overlay the Bitcoin chart with the Ethereum chart and the OVB indicator. Your chart setup should basically have 3 windows. One for the Bitcoin chart and the second one for the Ethereum chart. Last but not least, make one window for the OVB indicator/5(48). May 31, · Bitcoin Technical Analysis: Top 8 Chart Patterns for Crypto Trading. Technical Analysis: Chart Patterns for Crypto Trading. Chart patterns are the bread and butter of any technical trader, and it is important to understand what they mean, and know how to act accordingly.
Chart trading bitcoinBTCUSD — Bitcoin Chart and Price — TradingView
If the current price crosses below the long-term moving average, it indicates a bearish breakout. Moving average convergence-divergence, or MACD, is a trend-following oscillator popular for gauging momentum.
MACD takes two exponential moving averages like the day and day EMA , then plots them against the zero lines to measure the momentum of a trend. It indicates that the market is bullish. The higher the value, the stronger the upward momentum. A negative MACD , meanwhile, indicates that the market is bearish, with lower values indicating strong downward momentum.
Pivotal events include convergence, crossover, and divergence from the zero line and the signal line. Relative strength index, or RSI, is a way to indicate momentum.
Momentum can identify the strength of market trends, giving you a good idea of when to buy or sell based on whether markets are overbought or oversold. RSI oscillates between 0 and , with the typical timeframe being 14 days. When RSI is below 30, it indicates the market is oversold. When the RSI is above 70, it indicates the market is overbought. However, some traders use 20 and 80 as the boundaries instead, which can be more telling for highly volatile markets including crypto.
Because RSI is a leading indicator, the slope of the RSI can indicate a trend change before that trend is observed in the general market. For that reason, RSI is one of the most common ways of analyzing market conditions.
These values are absolute, which means that losses are calculated as positive values. You can see a bullish divergence when the price hits a lower low and RSI hits a higher low. A bearish divergence, meanwhile, occurs when the price hits a higher high and RSI hits a lower high. We can also use RSI to observe RSI failure swings, which are seen as indications of potential trend reversals in a bearish or bullish direction. A bullish failure swing occurs when RSI falls below 30, bounces past 30, falls back, but does not fall below 30 and makes a new high.
A bearish failure swing, meanwhile, occurs when the RSI breaks above 70, falls back, bounces without breaking 70, and falls back to a new low. SAR will stick close to price movements over time, falling below the price curve during uptrends and above the price curve during downtrends.
Because of this nature, traders use the parabolic SAR indicator to set trailing stops and protect against losses. There are separate formulas for calculating rising and falling SAR.
The formula takes data from one period behind. In these formulas, EP is the extreme point either the highest high or the lowest low of the current trend and AF is the acceleration factor. The acceleration factor is initially set to a value of 0. When you set AF too high, it can create too many whipsaws, creating false reversal signals. Average directional index ADX has risen in popularity in recent years to become a preferred indicator for estimating the strength of a trend.
As a lagging oscillator, ADX offers little insight into the future trend direction, although it does indicate the magnitude of market forces behind a trend. ADX oscillates between 0 and , with ADX typically below 20 in a ranging market and above 25 in a trending market. An ADX above 40 indicates a strong trend. We calculate DMI by collating the highs and lows of consecutive periods. These formulas may seem complex.
There are plenty of tools that implement these formulas for you. If you want to be an informed technical trader, however, then it helps to understand where these formulas come from. ATR offers no indication of trend direction. This is a strong bullish signal. Fibonacci retracement , as you may expect, is connected to the famous Fibonacci sequence or Fibonacci number.
The sequence starts with the numbers 0 and 1, with each successive number in the sequence behind the sum of the two preceding numbers.
It seeks to quantify how much of a pullback we can expect after a surge or drop in prices. In the Fibonacci sequence, the ratio of any number to its successor is 0.
This is the golden ratio , a number that plays a significant role in biology and mathematics. Fibonacci retracement uses this same ratio to identify support and resistance levels. Retracement levels are drawn on a price chart after marking the high and low point of a trend.
Why are these numbers important? Well, a A bounce from this level is less common if the correction has momentum. The Some analysts also use a derivative of Fibonacci retracement called the Fibonacci extension to identify how far a rally might go.
Under the Fibonacci extension, zones can be found at Elliott studied American markets for a decade during his retirement, then theorized that prices inevitably — and constantly — move in a fractal wave pattern. This fractal wave pattern is linked to natural laws, and you can outline the fractal wave using the Fibonacci sequence. Elliott theorized that market prices moved in two types of waves, including impulse waves and corrective waves.
Impulse Waves: Impulse waves, also known as motive waves, move in the direction of the prevailing trend and consist of five smaller waves, including three trend-advancing or actionary sub-waves split by two corrective sub-waves. Corrective Waves: Corrective waves that can be part of a larger impulse wave move against the direction of the prevailing trend and consist of three smaller waves, including two corrective sub-waves split by one actionary sub-wave.
This structure makes up each Elliott wave cycle. We saw this pattern in real bitcoin markets during This chart also shows prices holding at the Fibonacci retracement levels and Elliott wave patterns are just two types of technical indicators that form a partial picture of crypto markets. If all of the signals are pointing towards a similar result, then you have a more informed view of the market. Bollinger bands trace their origin to American financial analyst John Bollinger, who developed the theory in the s.
Bollinger band analysis uses a moving average-based overlay to measure price volatility. The theory involves three bands, including a middle band to represent the simple moving average and an upper and lower band to represent standard deviations.
For the middle band, analysts typically use the day simple moving average SMA. The upper band, meanwhile, is the same SMA with two standards of deviation added, while the lower band subtracts two standards of deviation. Analysts can adjust the number of periods based on their trading preferences. However, analysts will use the same number of periods to calculate SMA that they use to calculate standard deviation. When the price suddenly moves outside of the upper or lower band, it indicates a breakout could be upcoming.
During a strong uptrend in markets, prices tend to hug or move out of the upper band, for example, while during a strong downtrend, price activity is focused around the lower band. During market swings, the middle bands acts as a resistance for downtrend movements and a support level for uptrend movements.
There are multiple variations of these patterns. M Tops: M top or double top patterns occur in an uptrend and are indicative of a bearish reversal. In this formation, the price hits a point high above the upper band, then retreats below the middle band. The band moves up again but stops short of the upper band. When the second surge fails to reach the upper band, it signals a weakening trend and likely reversal. W Bottoms: The W bottom or double bottom formation is what happens when the M top formation gets flipped upside down.
It signals a bullish reversal. It starts with the price plummeting below the lower band, then rallying past the middle band before dropping again. During the second drop, the price does not touch the lower band, then rallies past the earlier swing high to break out into a bullish reversal, ultimately forming a W. On balance volume OBV is a volume-based oscillator and leading indicator. The signal quantifies volume, using cumulative trading volume to measure the strength of trends in upward or downward directions.
The idea behind on balance volume is that significant changes in volume often precede price movements, and that volume tends to be higher on days when the price moves in the direction of the prevailing trend. OBV adds volume during periods when the close is higher than the previous close, then subtracts volume during periods when the close is lower. OBV technical analysis focuses less about the actual value of the volume. Instead, it looks at the rate of change or the rise and fall.
This rise and fall, according to OBV theory, is what indicates the strength of buy and sell pressure. As OBV rises, it pushes buy pressure higher, leading to higher prices. When OBV is falling, it indicates a price decline is imminent.
Analysts use the OBV oscillator to identify support and resistance levels, then look for breakouts that precede price breakouts. We see this effect in action in the next graph. We see the price make a higher swing high while OBV makes a lower swing high, indicating a weakening uptrend.
In a similar fashion, when the price hits a lower low and OBV makes a higher low, the downtrend is losing steam, and a bullish breakout could be upcoming. This is where analyzing your other trading signals can come in handy.
You might notice OBV diverging from the prevailing trend, for example, then use your other signals to better inform your next decision. Stochastic oscillator is a leading oscillator that measures momentum, then uses that momentum to predict where markets will move next.
The method was developed in the s based on two key concepts:. With that in mind, stochastic oscillator analysis measures the relationship between closing prices over a given period as well as the trading range high price and low price of that period.
Based on this relationship, the stochastic oscillator measures potential trend reversal, including overbought and oversold conditions. The indicator oscillators between 0 and These numbers indicate the bottom and top of the trading range over a specific time scale. That time scale is typically set to 14 periods. Values higher than 80 indicate an overbought market, while values lower than 20 indicate an oversold market.
However, these numbers do not always indicate a reversal. During strong trends, the price can hover at these extreme ends of the range for a lengthy period of time. Stochastic oscillator analysis can, however, indicate a reversal or surge in momentum in certain instances. Stochastic oscillator theory is also based on the idea that closing prices tend to hover in the upper half of the trading range during an uptrend while hovering near the lower half during a downtrend.
Analysts will look for crossovers at the midpoint to indicate a shifting trend. Bullish divergences occur when the price hits a lower low while the oscillator hits a higher low.
Bearish divergences, meanwhile, occur when the price hits a higher high while the oscillator swings to a lower high. These reversals can also be confirmed when the price breaks past the most recent swing high in a bullish divergence or the most recent swing low in a bearish divergence.
Both of these things can confirm the reversal. During a bull setup , the oscillator hits a higher high as the price hits a lower high.
When the price swings to a lower high, market momentum continues to surge, and the price will likely rise even further. During a bear setup , the oscillator hits a lower low as the price hits a higher low. In this situation, progressive downward momentum indicates that a continued upward surge is unlikely even though the price is diverging upwards.
When checking stochastic oscillator analysis, you might also find something called StochRSI. This is a derivative of stochastic oscillator theory that applies the oscillator to the relative strength index RSI instead of the price. In that sense, StochRSI is a momentum oscillator of a momentum oscillator. You calculate StochRSI using the same formula as you would for stochastic oscillator analysis, except that you replace the price values with RSI values.
Technical analysis works particularly well for developing medium and long-term insights. However, it can be more difficult when dealing with fewer trading periods and shorter time scales.
Candlestick patterns are used in conjunction with chart patterns and technical indicators to provide further confirmation for expected breakouts. We explained the basics of candlestick charts up above. We told you how a candlestick pattern works, including what the body and wick of the candlestick means.
Candlestick pattern analysis is particularly useful because candlestick charts contain more information for a single trading period than any other type of chart. At a glance, you can see how markets performed that day based on the body of the candlestick, the size of the wick, and the relationship between the upper and lower wick and the body.
Each candlestick tells you whether buyers or sellers were in control during that particular trading period and how other market forces competed against each other. Learning to read candlestick charts can be one of your best skills to develop as a trader.
Here are some of the features common in candlestick charts. These candlesticks indicate uneventful trading periods. The candlestick tells us that the price moved very little from open to close during this period. It also shows us that the trading range — the spread between the highest and lowest prices during the day — was small.
Regardless of the color of the body of the candlestick, this candlestick shows that bulls and bears are holding steady for this period. An intense trading session where the price moved significantly from open to close might look like the candlesticks above. The green candlestick shows that buyers dominated the session, telling us it was a bullish market.
The red candlestick shows that sellers dominated, giving the market bearish momentum. You may hear analysts talk about spinning top candlesticks. On these candlesticks, the wicks are relatively long. This is a neutral pattern regardless of the color of the body.
With this pattern, the body of the candlestick is similar to a short day, although the shadows indicate a more significant trading range. Buyers and sellers both pushed the market at various points, although the session ultimately closed near to where it opened. The color of the body of this candlestick is not very important for this pattern. When the body is near the bottom with a long upper shadow, it indicates that buyers made an effort to push the market up, but strong selling momentum forced the price to settle back down low, signaling a bearish market.
Sellers tried to take control, although strong buying momentum eventually pushed it near the top. A marubozu candlestick only has a body and there are no noticeable shadows wicks on either side. This candlestick occurs when the open and close of a session are close to the high and low. A red marubozu candlestick tells us that the session opened at its highest point and closed at its lowest point, indicating strong selling pressure throughout the period.
The longer the body, the greater the momentum in either direction. A hammer candlestick pattern forms after a session of declining prices. The session closed near the top with no upper shadow and a lower shadow twice as long as the body. The hammer pattern indicates that buyers are starting to push back. The only requirement here is that the candlestick needs to close higher in green to validate the pattern. The hanging man candlestick pattern is identical to the hammer pattern at first glance.
Just like the hammer, the hanging man can be either green or read. During an uptrend, the hanging man is seen as a warning: there was downward activity but buyers pushed the price up towards the end of the session. If the next candlestick closes lower, than the hanging man candlestick can signal a bearish reversal. An upside down or inverted hammer after a downtrend is considered a bullish reversal pattern but only if the next candlestick closes higher.
This candlestick tells us the session ultimately closed near its opening price, although the upper shadow is an early indication that buyers are challenging sellers for the market.
A shooting star is identical in appearance to an inverted hammer, but it forms in an uptrend instead of a downtrend, making it a bearish signal. Although the shooting star candlestick indicates further continuation of the uptrend as shown by the long upper shadow or wick , the session ultimately closed near the bottom of its range, which indicates weakening upward momentum.
This is where we start getting into the weird and unique candlestick signals. A doji is a neutral cruciform pattern that indicates a state of near-equilibrium in the market. The session traded high and low, but ultimately closed exactly where it opened. With the doji candlestick, the upper and lower shadows may or may not be equal. Sometimes, the doji indicates relenting momentum or a potential reversal — say, when it forms next to certain other patterns.
The dragonfly doji candlestick pattern has a long lower shadow and no upper shadow, and the open and close are equal to the high for the session. A gravestone doji has along upper shadow and no lower shadow, and the open and close are equal to the low for the session. The gravestone doji candlestick in an uptrend signals a bearish reversal. On both the dragonfly and gravestone doji candlesticks, the length of the shadow is a good signal of the momentum behind a reversal.
Up above, we analyzed candlesticks based on a single candlestick for a single session. In most cases, however, candlestick analysis involves reading multiple candlesticks to discern a pattern. They can occur in two subsequent trading sessions. Or, they can occur in close proximity to one another. A bearish engulfing pattern is a two-period pattern that signals a bearish reversal when seen during an uptrend. The pattern starts with a short green body followed by a longer candlestick with a red body.
A bullish engulfing signals a bullish reversal pattern in an uptrend. They not only indicate a shift in the movement of markets, but they also indicate a significant change in momentum. It makes sense when you look at the two-period candlestick.
A bullish harami forms in a downtrend when a long red candlestick is followed by a small green candlestick. A bearish harami consists of a large green candlestick fully covering the entirety of the red candlestick.
Harami patterns typically suggest relenting momentum after a strong trend. A harami cross is a two-period pattern similar to a harami, except that the second candlestick is a doji the cross image we discussed above , with the doji fully engulfed by the body of the first candlestick.
The harami cross indicates weakening momentum or indecision in the market instead of a complete reversal. For this pattern to indicate a reversal, the third candlestick following the doji must be in concurrence.
If it closes above in green, then it could mean the harami cross was simply a brief consolidation before the uptrend continues. A two-period tweezer top candlestick pattern forms when at least two candlesticks have even tops, regardless of their bottoms. When formed during an uptrend, the tweezer top is considered a potential reversal pattern. The candlestick tells us that the upper limit price has been repeatedly rejected at the same level, which suggests strong resistance at that level.
As more candlesticks form even tops around these sessions, it provides greater evidence for resistance at that level. The reversal is confirmed by a bearish close in red below the midpoint of the first candlestick in the pattern.
A tweezer bottom is the inverse of the tweezer top: the bottoms of the candlesticks are even, but the tops are not. A tweezer bottom is a potential reversal pattern in a downtrend. When multiple candlesticks have even bottoms, it suggests that the market has repeatedly rejected the same low, which indicates strong support at that level.
Bullish reversal is complete when the pattern is followed by a higher close. The shadows are not considered. Want to see the price close back above red line, thats the trigger for my long entry.
But the good news is it can't get much worse! The 1st gap was D The 2nd gap was D 1st gap x 1. Midterm forecast: While the price is above the support 0. We make sure when the resistance at 0. If the support at 0. Technical analysis: While the RSI downtrend 1 is not broken, bearish wave in price would continue. A peak is Key patterns to look for when attempting to gain insight into potential future price action.
Videos only. An important feature of a diamond top bottom pattern is that the volume corresponds with the size of the trading range, increasing as the price rises declines and the range peaking near the high low price point. The downward upward trend that follows this is an indication of reduced enthusiasm amongst traders about the market. This narrowing range in the second half of a diamond pattern can be represented by a descending resistance level and ascending support, which is a critical breakout point.
Traders should look out for this line to be crossed before accepting that the trend is going to change. It is caused by big traders looking for large liquidity to fill their orders by hunting stop-losses and baiting breakout traders. Harmonic price patterns are those that take geometric price patterns to the next level by utilizing Fibonacci numbers to define precise turning points. At the root of the methodology is the golden ratio, or some derivative of it 0. The golden ratio is found in almost all natural and environmental structures and events; it is also found in man-made structures.
Since the pattern repeats throughout nature and within society, the ratio is also seen in the financial markets, which are affected by the environments and societies in which they trade. Harmonic patterns are much more advanced than simple candlestick or chart patterns above, and we will not go through them in detail here. For more information, read about harmonic patterns on Investopedia and Babypips. For more Bitcoin technical analysis resources like this, read our complete guide to learn how to trade crypto.
View all posts by alunasocial. Skip to content. Technical Analysis: Chart Patterns for Crypto Trading Chart patterns are the bread and butter of any technical trader, and it is important to understand what they mean, and know how to act accordingly.
Top 8 Chart Patterns for Crypto Trading There are too many chart patterns to list them all here, so we will just be picking some that have a relatively high success rate. The exact opposite is true for the descending triangle pattern.