Validators, chosen randomly among those staking a minimum amount of ETH, are tasked with verifying transactions and adding new blocks to the blockchain. In return, they receive freshly minted ETH and a share of the transaction fees.

Understanding ETH staking: the shift to PoS

Ethereum’s leap from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) system, marked by Ethereum 2.0 or Eth2 in September 2022, was more than a mere upgrade; it was a pivotal transformation for the Ethereum blockchain. Unlike the previous PoW mechanism, which relied on computational power to validate transactions and add blocks (akin to Bitcoin’s system), PoS adopts a more energy-efficient and inclusive approach. In PoS, ETH staking is not only an option but a cornerstone for the network’s functionality.

This shift, known as “The Merge,” addressed critical issues like excessive energy consumption, scalability challenges, and the centralization of mining power. By moving away from the energy-hungry PoW, Ethereum significantly reduced its environmental footprint and opened doors to more scalable solutions, mitigating the dominance of miners with hefty computational resources.

How to stake Ethereum: diverse approaches for every investor

Ethereum (ETH) staking offers various paths for users, each with its tradeoffs and benefits. The most direct method is solo staking, where users with at least 32 ETH can run their own validator node. This approach promises the highest rewards but requires significant investment in both ETH and hardware, as well as technical expertise to maintain the node.

For those with less ETH or technical know-how, staking-as-a-service and pooled staking present more accessible alternatives. These methods involve delegating your ETH to a third-party service or joining forces with other stakers to pool resources.

Staking-as-a-service, offered by crypto exchanges and crypto staking wallets, simplifies the process by managing the technical aspects of staking on your behalf. Pooled staking, on the other hand, aggregates smaller amounts of ETH from multiple users, allowing them to share in the crypto staking rewards without meeting the high minimums of solo staking.

Benefits and procedures of Ethereum staking: maximizing your ETH investment

Staking Ethereum is more than just a passive income opportunity; it’s a way to actively participate in the network’s governance and contribute to its security and scalability. By staking ETH, you earn rewards, but you also gain a voice in the Ethereum ecosystem. Crypto staking validators play a critical role in voting on protocol changes, ensuring that the network evolves in response to the community’s needs.

The process of staking Ethereum can be initiated through a compatible crypto staking wallet. Key steps include:

1. Choosing a Wallet: Select a wallet that supports Ethereum staking, such as Cryptostake.com.
2. Transferring ETH: Move your Ethereum tokens to the chosen wallet, either from an exchange or another wallet.
3. Navigating to Staking: Within your wallet’s interface, locate the staking section. This may require clicking on a specific tab or button.
4. Staking Your ETH: Follow the wallet’s instructions to lock your ETH in the staking contract.

Wallets come in two forms: hot wallets (online, software-based) and cold wallets (offline, hardware-based). Hot wallets offer ease of access but are more vulnerable to online threats, while cold wallets provide enhanced security at the expense of convenience.

As of now, the estimated staking yield for Ethereum stands at approximately 2.87%. This implies that stakers can expect to earn interest on crypto of 2.87% annually if they hold their staked assets for a full year. It’s noteworthy that this rate is subject to fluctuation; just 24 hours ago, the reward rate was slightly higher at 3.21%. Looking back 30 days, the rate was set at 3.11%. These variations highlight the dynamic nature of ETH staking rewards and underscore the importance of staying informed about current rates to maximize staking benefits.

Staking Ethereum is not only a financial decision but also an environmental one. By replacing energy-intensive mining with human validation, Ethereum’s PoS model significantly reduces the ecological impact. This shift lowers the barrier to entry, democratizing participation and bolstering network decentralization.

The bottom line and unstaking Ethereum: a comprehensive outlook

Ethereum staking marks a significant evolution in the way the Ethereum network operates and offers a unique opportunity for ETH holders. By locking up ETH, you not only support the network’s security and governance but also stand to earn rewards in newly minted Ethereum. Whether you choose to run your own validator node, utilize a staking service, or join a staking pool, the process is now more accessible and environmentally friendly than the traditional mining approach.

However, it’s essential to consider the unstaking process. If you’re staking through a service provider, the time required to unstake ETH varies depending on their terms. Some services offer rapid unstaking options, while others may impose longer lock-up periods. This variability underscores the importance of understanding the specific conditions of your chosen staking platform before committing your assets.

In summary, Ethereum staking is not just a means to earn rewards; it’s a step towards a more scalable, secure, and community-driven blockchain ecosystem. With the transition to PoS, Ethereum has opened new doors for participation, making it easier for individuals to contribute to and benefit from the network’s growth and success.

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Decoding Technical Analysis: Laying the Foundation

Technical analysis, a time-tested method employed by seasoned traders, empowers them to evaluate and predict future price movements in financial markets, particularly the cryptosphere. In stark contrast to fundamental analysis that probes the intrinsic value of assets, technical analysis derives its potency solely from historical price data and market behavior, crafting a unique roadmap for traders.

Charts: The Canvas of Technical Mastery

At the heart of technical analysis lies the art of charting. With a panoply of chart types at their disposal, traders unleash their analytical prowess to interpret price movements over defined periods. From the simplicity of line charts to the intricacy of candlestick charts, these visual marvels bestow traders with the foresight to discern patterns and trends, unearthing potential opportunities amidst the chaos.

Pillars of Wisdom: Key Concepts Explored

Within the labyrinth of technical analysis, certain pillars of wisdom stand tall, guiding traders to the elixir of success. Support and resistance levels, the bedrock of this approach, depict price thresholds where cryptocurrencies halt their descent or ascent, as buyers and sellers clash in a delicate dance.

Trend lines, like celestial navigational aids, form straight paths on the price chart, connecting historical price points. They confer upon traders the vision to decipher the prevailing trend’s trajectory and, perhaps more crucially, foresee potential reversals.

Moving averages, those celestial harmonizers, smooth out price data, enabling traders to discern trends over specific periods. They filter out market noise, casting the spotlight on the direction of the grand symphony of price movements.

The Enigmatic RSI and Chart Patterns Unveiled

Amidst the ever-shifting tides of the crypto market, two enigmas beckon our attention. The first is the Relative Strength Index (RSI), a formidable momentum oscillator gauging the velocity and amplitude of price changes. In its whisperings, traders find the haunting echoes of overbought and oversold conditions, cautioning against irrational exuberance or unwarranted despair.

Next, we traverse the realm of chart patterns, where geometrical revelations hold the key to unlocking market secrets. Behold the head and shoulders, a portentous triplet of peaks, signifying an imminent trend reversal. The double tops and bottoms, as dual protagonists of transformation, foretell a new chapter in the crypto saga. Triangles, those geometric weavers, embroider consolidation periods in the crypto tapestry, each side whispering of future price leaps.

Candlestick Patterns: Illuminating the Path

In the shadows of the crypto realm, candlestick patterns cast their flickering light, illuminating the path for intrepid traders. Bullish formations like the hammer, engulfing pattern, and morning star breathe hope into the hearts of those longing for price ascension. Alas, the bearish specters of the shooting star, bearish engulfing pattern, and evening star forewarn of an impending descent into the depths of the abyss.

Fibonacci Retracement: Unveiling Hidden Harmonies

Amidst the chaos of the crypto cosmos, Fibonacci retracement emerges as a celestial conductor, revealing hidden harmonies in price movements. These divine horizontal lines, woven from the fabric of the Fibonacci sequence, herald potential support and resistance levels, guiding traders to strategic entry and exit points, while conjuring glimpses of the price’s future destination.

Harmonizing with Momentum Indicators

In this symphony of analysis, momentum indicators play a symphonic role. The Moving Average Convergence Divergence (MACD), that sonorous trend-following indicator, discloses the mystical interplay between two moving averages, unraveling the strength and direction of a trend.

Enter the Stochastic Oscillator, a rhythmic comparison of closing prices to price ranges over a specific period. It heralds the rising crescendo of overbought or oversold conditions, signaling potential market inflection points.

Volume: The Undercurrents of Price Movements

Beneath the surface, volume reveals its cryptic tales. The On-Balance Volume (OBV) bears witness to the ebb and flow of volume, unraveling the mysteries of buying and selling pressure. Meanwhile, the Chaikin Money Flow (CMF), that arcane fusion of price and volume, unveils the intensity of financial tides, guiding traders through treacherous waters.

Crafting a Trading Symphony: Strategies Unveiled

As the technical repertoire unfolds, traders master the art of crafting their unique symphonies in the crypto market. From the exhilarating rhythms of day trading, where chart patterns and indicators orchestrate rapid decisions, to the languid harmonies of swing trading, guided by trends and reversals over days and weeks, each strategy weaves its enchantment.

The timeless echoes of long-term investment strategies resonate, as traders employ technical analysis to fathom the very soul of cryptocurrencies, gauging their potential for a fulfilling future.

Navigating the Quicksands: Overcoming Challenges

Yet, amidst the triumphs, challenges lurk, demanding unwavering resolve. The crypto market’s tempestuous volatility calls for steadfast calm, a lighthouse to weather the storm. Beware the specter of market manipulation, ever haunting the trader’s path. The antidote? Rely on the harmonious chorus of multiple indicators, a sanctuary against deception.

Guard against the siren song of over-analysis, and find solace in the simple symphony of sound decision-making. Most crucially, master the art of emotional discipline, the virtuoso conductor that guides the trader through the sea of tumultuous emotions.

In the vibrant realm of crypto trading, technical analysis stands as a formidable ally, gifting traders the power of foresight. Embrace its wisdom, combine it with prudent risk management, and wield the baton of emotional discipline. Let the symphony of success resound as you navigate the captivating world of cryptocurrency trading. Happy trading, maestros of the crypto cosmos!

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What is a candlestick chart?

A candlestick chart shows the change in the price of an asset over a specific period. Traders can choose the periods they study depending on whether they are deciding on a low or high timeframe. Each candlestick can be set for any time period, from one minute to an entire month. A candlestick has four main components: high, low, open and close. When trading, the price of the asset at the beginning of the trading period is denoted by the “opening price” and at the end of the period by the “closing price”. At the same time, the “high” and “low” are the highest and lowest price of an asset reached during a trading session.

How to Read Candlestick Charts

Traders use candlestick charts to display the price dynamics of an asset. These charts get their name from the long lines (wicks) and rectangular shapes that are used to show price movements over a period of time. With the help of candlesticks, you can get an idea of the price movements as well as familiarize yourself with the general mood of the market for a particular asset. Over time, many candlesticks form into large patterns from which crypto traders get signals to make critical trading decisions. At first glance, candlestick charts may seem too difficult to understand. However, the more you study them, the more information they provide compared to simple line charts.

A red candlestick

A red candlestick shows that the closing price was lower than the opening price. In other words, the price of the asset decreased during the specified trading period. For example, let’s assume that the red candle shown above is a minute candle. In this case it means that the price of the asset closed below the level at which it opened one minute ago.

A green candlestick

If the candlestick turns green, then the price of the asset has risen and closed above the opening price. Wicks simply represent the difference between the open/close prices and the maximum/minimum prices reached in a given period. For example, let’s consider a green 10-minute candle that looks like the one pictured above. The upper wick means that at some point during the 10 minute period, the price rose above the last closing price. The difference between the maximum price reached and the closing price is represented by the upper wick. Likewise, the lower wick represents the difference between the opening price and the lowest price reached during that 10-minute period.

Important candlestick patterns you should know

There are several methods of reading and using a candlestick chart. Pattern recognition is used to predict trends, price direction and general dynamics. For a better understanding, we have compiled a list of bullish (indicating rising prices) and bearish (indicating falling prices) patterns that you should know.

Bullish patterns

Hammer

When it comes to outward similarities, the Hammer is exactly the kind of pattern that is very easy to recognize. The base of the downtrend has a long lower wick, like a normal hammer. The body is often small and the upper wick is short or may not be there at all. The hammer may be green or red. Depending on the situation, this may indicate an anticipated price increase or a strong trend reversal. The image below shows that after a period of high selling pressure, the bottom was broken. Immediately thereafter, the buyers began to gain momentum, hence the long bottom wick. Once the hammer formed, the trend reversed and prices began to rise.

Inverted Hammer

The only difference between an Inverted Hammer and a regular Hammer is that the long wick is directly above the body, not below it. The Upside Down Hammer can be green or red. Equally as a regular Hammer, an inverted Hammer signifies the potential beginning of an uptrend.

Bullish Engulfment

Two candles form this pattern at the end of a downtrend. The first candle is red (bearish), while the second is green (bullish) and much larger than the first. Simply put, the body of the second candle is big enough to completely absorb the previous one. In addition, there should be a small gap between the opening and closing prices of both candles. In most cases, these gaps are not common in the cryptocurrency markets. This pattern shows that buyer pressure has increased significantly and is breaking the sellers’ pressure.

Penetrating Line

This candlestick pattern is formed by a long red bearish candle followed by a long green candle. It occurs at the end of a downtrend. There is a gap between the opening and closing price of both candles. Also note that the green candle closes about halfway down the body of the bearish candle. This pattern shows that despite a bearish start, buyer pressure is increasing sharply within the second candle. This means that the bulls are showing considerable interest in buying at the prevailing price.

Morning Star

This pattern is formed by three separate candles at the bottom of the downtrend. The first bearish candle is quite long and the second, known as the star, has long wicks and a short body. The “star” closes below the previous candle. However, the third candle shifts toward the bull market and closes just above the midpoint of the first candle. This pattern shows that the pressure of the downtrend is decreasing and beginning to shift into an uptrend.

Bear patterns

Hanging

This pattern is considered a bearish alternative to the Hammer. It is usually formed at the end of an uptrend with a long lower wick and a small body. It may be red or green. This pattern shows that the uptrend has weakened and traders consider this a signal to sell.

Shooting Star

This pattern consists of a single candle with a very small bottom wick and a thin body, while the top wick is quite long. Unlike the Inverted Hammer, this pattern occurs at the peak of an uptrend. It means a rejection of price immediately after a significant rise. Such a pattern is a sign of a bearish reversal.

Bearish takeover

A bearish takeover is formed by two candles. Like its bullish counterpart, the first candle is green (bullish), while the second is red (bearish) and big enough to engulf the first. The body of the second candle is bigger than the first. There is also a gap between the opening and closing prices of each candle. This pattern occurs at the top of an uptrend. This bearish takeover shows that seller pressure has increased and signifies the beginning of a possible downtrend.

Conclusion

No matter how effective and useful candlestick patterns are, remember that it takes a lot of experience to use these signals effectively. In fact, most traders use candlestick patterns along with other technical indicators for trading to more closely check and confirm trends.

The post 8 Most important Candlestick Patterns in Cryptocurrency Trading appeared first on DaoGam.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is an impulse indicator, which provides indications on the basis of which one can conclude whether an asset is overbought or oversold. It does so by measuring the magnitude of recent price movements (the standard setup consists of 14 periods, 14 days, 14 hours, etc.). The data is then displayed as an oscillator, which can have a value between 0 and 100.

Since the RSI is an impulse indicator, it represents the force with which price changes. This means that if the indicator is increasing when the price is rising, the upward trend is strong and more and more buyers are coming. On the contrary, if the indicator measure decreases and the price increases, it may indicate that the sellers may soon gain control of this market.
The traditional interpretation of RSI is in the numerical reading of the line on the chart: if it is above 70, then the asset is overbought, and when it is below 30, then the asset is considered oversold. Thus, extreme values may indicate an impending trend reversal or pullback. However, it would be better not to consider these values as direct buy or sell signals. As with many other technical analysis (TA) methods, RSI can produce false or misleading signals, so it’s always a good idea to consider other factors before entering a trade.

Moving Average (MA)

The Moving Average (MA) smoothes out price fluctuations, filtering out market noise and highlighting the direction of the trend. Because the MA is based on past price data, it is a lagging indicator.

The two most commonly used moving averages are the simple moving average (SMA or MA) and the exponential moving average (EMA). The SMA is formed on the basis of price data for a certain period, and their average value. For example, a 10-day SMA is constructed by calculating the average price of the past 10 days. The EMA, on the other hand, gives more weight to the most recent price data. This makes it more sensitive to recent price changes.

As mentioned above, the moving average is a lagging indicator. The longer the period, the longer the signal lag. Thus, a 200-day SMA is much slower to react to a recent price change than a 50-day SMA.
Traders often use ratios of price to specific moving averages to gauge the current trend. For example, if price stays above the 200-day SMA for an extended period, then most traders consider such a market to be bullish.

Traders can also use crossovers or so-called crossovers of moving averages as a signal to buy or sell. For example, if the 100-day SMA crosses over the 200-day SMA, this might be considered a sell signal. But what exactly does this cross mean? It indicates that the average price of the last 100 days is now lower than the last 200 days. The selling idea here is that short-term price movements no longer follow the uptrend and in most cases the trend could change.

Moving Average Convergence/Divergence (MACD)

MACD (short for Moving Average Convergence Divergence) is a technical indicator, designed to determine the future price movement of an asset by means of interconnecting two moving averages. It consists of two lines: the MACD line and the signal line. The MACD line is calculated by subtracting the 26-day EMA from the 12-day EMA and plots the result against the 9-day EMA, which serves as the signal line. Many charting tools often include a histogram that shows the distance between these lines.

By looking for a divergence (divergence) between the MACD and the price movement, traders can get an idea of the strength of the current trend. For example: the price shows a new maximum, while the MACD shows a very low reading, which indicates that the market could soon reverse. Because of this indicator, we can conclude: that with such a high price and low momentum there is a high probability for a pullback or reversal.

In addition, traders can use this indicator to look for crosses between the MACD line and its signal line. As a rule, a signal to buy is considered when the MACD line crosses the signal line from bottom to top. And vice versa, a point where the MACD signal line crosses the signal line downward is considered a sell signal.

The MACD is often used in conjunction with the RSI because both indicators measure momentum, but do so from different data. It is suggested that together they can give a more complete technical view of the market.

Stochastic RSI (StochRSI)

Stochastic RSI (Relative Strength Index) is an oscillator, which tracks the price movements to determine if an asset is overbought or oversold. As the name implies, the stochastic is a derivative of the regular RSI, which is formed on the basis of basic indicators instead of price data. The indicator is calculated by applying the stochastic RSI formula to regular RSI values. The standard settings of the indicator range from 0 to 1 (or 0 to 100).

Due to its sensitivity, the stochastic RSI can generate many difficult to interpret trading signals. As a rule, it tends to be most useful when indicators are near the upper or lower extremes of its range.

If the RSI stochastic is above 0.8 it is considered overbought and a value below 0.2 may indicate over-sold. A value of 0 means that RSI has the lowest value in the measured period (the default setting is usually 14). Alternatively, a value of 1 means that RSI has the highest value during the measurement period.

Similar to the standard indicator settings, stochastic RSI overbought or oversold signals do not mean that price will go in the exact direction the indicator is pointing. In this case, it simply indicates that the RSI values (from which the stochastics RSI values were derived) are close to the extremes. It is important to remember that stochastic RSI is more sensitive than its predecessor, so it generates more false or misleading signals.

Bollinger Lines (BB)

Bollinger Lines measure the volatility of the market and also determine overbought and oversold levels of an asset. The indicator consists of three lines: SMA (middle band), upper and lower bands. The settings can vary, but basically the upper and lower lines are two standard deviations from the moving average. The distance between the lines is directly related to volatility, the distance changes when it increases or decreases.

As a rule, the closer the price is to the upper line, the more overbought the chosen asset is. In the opposite situation, the closer the price is to the bottom line, the higher it is oversold. In most cases the price does not go beyond the lines, but it is possible that it may break above or below them. While this scenario may not be a trading signal in itself, it serves as an indicator of extreme market conditions.

Another most important concept from the lines is called squeeze (from the English squeeze). This case refers to the period of low volatility, when all the lines are very close to each other. In this situation, the indicator can signal the potential volatility in the future, in the opposite case, if the lines are at a great distance from each other, it can indicate a possible decrease in price fluctuations.

Conclusion

Although technical indicators provide data to help you navigate the market, it’s important to keep in mind that the interpretation of such data is highly subjective. Therefore, before you form your trades you need to take care that your personal biases do not influence your decision-making in any way. What might be a direct buy or sell signal for one trader will look like mere market noise to another.
As with most market analysis methods, indicators are most effective when used in conjunction with each other or with other methods, such as Fundamental Analysis (FA).
The best way to learn technical analysis (TA) is through plenty of practice.

The post 5 Main Indicators Used in Technical Analysis appeared first on DaoGam.

The patterns are based on the observation of the chart. Traders have noticed that the charts in trading terminals and analytical platforms can “draw” figures – to form a visual “picture” from candlesticks and lines. Recall how the Big Dipper looks like in the night sky – seven bright stars are connected by lines, and a bucket is formed. Traders determine patterns in approximately the same way. Only instead of stars, they use candlesticks indicating maximum and minimum prices in the time interval.

Most patterns are determined visually. You can use the drawing tools and lines available in many terminals for convenience. Detection of a pattern can serve as a signal to open a position. Most of the patterns involve a trend reversal or signal the continuation of a trend. Other patterns are universal – the signal depends on the trend and the position of the pattern on the chart.

Chart patterns can be used by mid-term and intraday traders. It depends on the trader’s strategy and on the particular pattern. Some patterns show better results on small timeframes (1m to 1h), but most are confined to medium timeframes (1h to 1d).

Of course, shapes are no guarantee that the market will go exactly as predicted. But searching for and correctly reading the patterns will help a trader to determine the trend, market dynamics, possible entry and exit points. Let’s consider existing patterns and situations when they occur.

Trend reversal patterns

When head and shoulders, double/triple top/bottom patterns appear, a change in the current trend or a serious price correction is likely. Often such patterns are formed at the historical maximums or at the strong support/resistance levels.

Head and shoulders

Head and shoulders pattern represents three tops. The middle one (head) is the highest, the tops on the edges (shoulders) are approximately at the same level. Entry into the position is possible at the breakdown of the neck line or at the price testing after the breakdown. In a downtrend, the pattern is formed mirrored.
triangle, ascending triangle, descending triangle, symmetrical triangle, bullish wedge, bearish wedge, wedge

Double top and double bottom

This pattern represents two/three tops or bottoms stopping at the same level. The price returns to the last low or high and then breaks the low/maximum, reversing in the other direction.
A double top is formed in the same way as a triple top. The key difference is that the support line is broken after the second peak. Traders look for entry points after the level breakdown or its subsequent testing.

Diamond

The “Diamond” pattern is a signal of a possible trend change. Sometimes this pattern is called “Diamond”, “Rhombus” or “Crystal”. A diamond looks like a quadrangle with the corners facing upwards, downwards and sideways. The upper and lower corners are approximately on the same axis, a slight shift is allowed.

When forming a diamond, extrema first move away from each other, then get closer. For example, if the figure appears on a falling trend, the lows will be renewed, each peak will be further from the previous one. After the peak divergence (central axis), the lows will rise and the highs will fall, narrowing the right corner of the diamond.

If the diamond is formed on a rising trend, a fall in price is possible after it. Such a figure appears mirror-like – on a rising trend, first the timeframe maximums are updated, then the corridor between the extremums widens.

Pipe bottoms (Bull and bearish takeover)

The Pipe Bottom is a simple candlestick pattern found on large timeframes. It consists of two candles, so it doesn’t quite fit into the pattern concept. Nevertheless, a pipe bottom can be represented as a geometric figure – a rectangle stretched downwards. A pipe bottom is two strong, long candlesticks, formed at the minimum price on the segment. The first candle is red, the second is green. Indicates a prolonged series of sales followed by a long bounce. They appear before a trend reversal, sometimes short-term, sometimes stable.

The inverse pattern is a pipe top. It is formed in a mirror manner, i.e. at maximum prices. The first candle is long and green, indicating a series of purchases. The second candle is red, indicating a series of sales. Whereas the bottom indicates a reversal to growth, the top indicates a reversal to a downtrend.

A similar pattern is the “Spike”. The difference of this pattern is that the Pipe bottom/top always consists of two long candlesticks of different directions. The spike may have additional short candlesticks. That is, the pipe is formed by one strong price impulse up/down and moves back, while the spike may “break up” into two or three candles, but with the same effect.

Three Crows

The Three Crows pattern is sometimes called the Three Black Crows pattern, where black means the market is over and the time for the “bears” is coming soon. This is not really a chart pattern, but rather a light candlestick pattern. But it’s very useful and easy to observe. It’s formed by red candlesticks and indicates a switch from a growth phase to a decline in price.

To “read” this model correctly, you need to consider the length of the previous green candlesticks. Three red candles are considered “black crows” when their combined length exceeds the combined length of the previous three green candles. Sometimes the appearance of crows is preceded by a small correction. For example, several short “sell” candlesticks. In this case, the “three crows” signal the confirmation of the selling trend.

Dragon

The Dragon is a rare pattern that portends a trend reversal. At least it consists of four points – “head”, “front paw”, “hump” and “back paw”. “Head” is the starting, upper point of the figure. It is a candle, completing a sideways movement/phase of small growth. After it a series of sales starts.

The second point is formed when the sales finish, the correction “upwards” and a series of green candles appears. The second point is the “forelegs”. The candle where growth is interrupted and the decline begins is the “hump of the dragon”. After the “hump”, sales continue until the price reverses on the “hind legs”. After the hind legs a large trend reversal begins (visual “dragon’s tail”). It is in the “tail” that traders open a buy position.

The “front paws” of the classic “correct” dragon are slightly lower than the “back paws” (about 10-15%). That is, the first candle is “cheaper” than the second, which forms the back legs.

The line drawn from the “head” to the “hump” should be descending. At the same time, both paw candles are placed below this line. The “hump” is placed at 30-50%, not lower. The fifth point is conditional – this is the place where the “head-hump” line crosses the chart after the price rebounds from the back legs. If you connect all the points with lines, you will get a zigzag tapered towards the end. The Fibonacci levels indicator can be used to calculate the distances between the points more precisely.

The Dragon can be bearish – it can appear after a series of purchases. Then the “head” is the point of sideways/sales exit before the growth phase. Otherwise it is strictly symmetrical: the first “paw” is the end of the long series of buys and a slight correction, with a short-term drop of the price, and the “tail” is the reversal of the big trend, coming from the “head” of the dragon.

Trend continuation patterns

After the end of the trend continuation pattern, the price movement in the previous direction is most likely. The main trend continuation patterns are the pennant, flag and rectangle.

Rectangle

Rectangle pattern (range, corridor, consolidation) is formed by horizontal support and resistance lines on the chart. The price gets into the range after the strong price impulses. The longer the price is in the range, the higher the probability of breaking through the boundary.
Rectangle pattern, patterns for analysis

Flag

The boundaries of the flag pattern are directed against the main trend. This pattern usually appears after strong price movements. The flag pattern may indicate that the bears took the correction as a reversal. It is possible to break through the boundaries of the channel and continue the trend in the same direction. Traders open a position after a breakdown of the boundaries of the flag in the direction of the main trend.

A bullish flag

When a bullish flag occurs, the price rises and then consolidates in a narrow range. The highs and lows of the correction are between the pattern boundaries. When the upper boundary of a bull flag is broken, the continuation of the main trend is most likely.
A bullish flag pattern for technical analysis, technical analysis in trading

Bear Flag

The bear flag pattern is characterized by a fall in price. After that the price consolidates and continues to move in a narrow range. If the bottom boundary of the bearish flag is broken, the downtrend is most likely to continue.

Pennant

A pennant is formed in a similar way to a triangle. The key difference is that the upper boundary of the pennant is downward while the lower boundary is upward. The pattern usually appears after strong impulse movements in the direction of the main trend.

A bullish pennant

A bullish pennant resembles a symmetrical triangle. As a rule, a bullish pennant pattern continues the current bullish trend. After the upper boundary of the pennant is broken, a price movement equal to the size of the pennant is possible.
bullish pennant pattern, bull pennant analysis

Bearish pennant

A bearish pennant is a mirror image of a bullish pennant. The pattern appears after a strong decline in price and ends with the appearance of a triangle in the form of a pennant. Usually a bearish pennant continues a bearish trend.
bearish pennant pattern, tehanalysis bearish pennant

A cup with a handle

“Cup and Handle” is a compound pattern that symbolizes the continuation of a trend. It is formed in the bull market and may serve as a signal to open buy positions. Conditions for the appearance of the “cup” may be described as several attempts of the “bears” to break the “bullish” trend. It usually appears after an upward price spurt and several high green candles.

After a bullish pullback, there is a struggle phase. It looks like a renewal of the lows and then the growth of the minimum extremums. At the same time, the highs are not updated – all the volatility is lower than the horizontal line drawn from the last candle of the “tug”. As a result, the lows describe a semicircle. The “cup” phase continues until the lows align with the original position.

When the “cup” is formed, the “bears” attempt to push the price down – this fighting phase forms the “handle”. If the buyers are stronger, the price trend continues to rise.

A mirror pattern – an inverted cup with a handle – is less common. Such pattern, respectively, occurs during a “bearish” trend and signals about its continuation. The “cup” phase is formed not by the lows but by the highs and also looks like an arc.

Golden cube

It is a quite rare pattern that occurs at the “sideways”. It signals the continuation of a flat, if it appears within a stable trend – the continuation of the trend. It looks like four candles, almost equal in size. These candles should be placed in a square. The height of each candle should be approximately equal to the width of the whole “bunch” of four candles.

It is permissible for the candles to differ slightly in body length. The length of the wicks makes no difference. It’s important that the candles were not too long, relative to the neighboring “neutral” candles. Otherwise, the figure can be interpreted as a spike and a signal of a trend reversal.

Undefined patterns. Double-sided patterns

Undefined patterns can inform the trader about both trend continuation and reversal. The price direction depends on the slope of the pattern lines in relation to the current trend.

Triangle

A triangle is usually formed when the top and base of price move toward each other (like the sides of a triangle). Often this pattern is referred to as a trend continuation pattern. In practice, a trend reversal is possible with a triangle.

Rising Triangle

An ascending triangle has a horizontal resistance line. With each wave, the lows are anchored higher and the price range becomes narrower. Usually, traders consider breaking the resistance line or rolling back to it to enter long positions.

Downward Triangle

In a descending triangle, one side of the pattern is formed by horizontal support and the other by declining highs. A descending triangle is the opposite of an ascending triangle. With this pattern, traders look for entry points after a breakdown of support or a pullback to it.

Symmetric Triangle

A symmetrical triangle reflects a situation in which the tops of prices are lower and the bottoms of prices are higher. Both sides of the triangle have the same angle of inclination. With this pattern, it is extremely difficult to determine the price movement. A breakout can provoke a price movement equal to the size of the pattern.

Wedge

In a rising trend, a trader can observe a bearish or bullish wedge. Unlike triangles, wedges do not have a flat side. Both sides slope in the same direction.

A bullish wedge

In a bullish (downward) wedge, local lows are updated. At the same time, the price in the range slows down. Therefore, on a rising chart, a bullish wedge looks like a small correction. The highs and lows of the wedge converge. Traders usually open short positions after breaking the upper boundary of the bullish wedge.

Bearish wedge

A bearish (rising) wedge is formed similarly to a bullish one. The difference is that the local maximums are being updated. The price slows down in a decreasing range. In a bearish wedge, a trend reversal or subsequent correction is possible.

Three Indians

Three Indians is a pattern formed from a trendline. It is sometimes called the Three of Touches. The second name accurately reflects the meaning of the pattern – the price must touch the drawn line three times for the trader to perceive the figure as a signal to trade.

The Three Touches can be used as a trend reversal indicator or as a confirmation indicator – depending on the type of pattern formed. For example, if three minimum touches are found (the line is plotted below the candlesticks), with each minimum higher than the previous one, this is a signal for the continuation of a bullish trend. If the line is above the candlesticks, touches three highs, and each high is higher than the previous one, it can be expected that the trend will reverse and the price will fall.

On a downtrend, the pattern reads in a mirror manner. Three lows, each lower than the previous one – continuation of the bear market. Three highs, each lower than the previous one – trend reversal to growth.

Harmonic Patterns

Harmonic patterns are complex patterns consisting of at least five points. The correct interpretation of harmonic patterns depends on the figure and its proportions. That is, the pattern signal should be considered only if the figure corresponds to the necessary parameters.

The proportions in GP are defined as the level of correction (in some sources – correlation). Simply speaking, one point of the pattern must “rollback” from the previous price by n-level. Or vice versa – to rise in the price to the necessary level, so the point can be considered an element of a pattern. You can use the tool “Fibonacci Correction” for calculations. Modern analytical platforms and terminals have auxiliary tools – templates.

For example, in TradingView there is “Template XABCD”. The trader just needs to put five points on the chart, and the indicator will automatically calculate the proportions between X, A, B, C and D. If the obtained proportions correspond to the pattern rules (see below for the rules), the pattern can be perceived as a signal.

Gartley’s butterfly

The Gartley’s butterfly is a harmonic pattern, consisting of five points. It looks like two triangles connected in one place. The first point of the butterfly is placed on the candle, at the beginning of a sharp price decline. The candle completing the series of sales before the reversal is the second point. It can be called the lower part of the left “wing” of the butterfly. After that the price rises again to a relatively high level. But not higher than the starting point. Thus, the first “wing” is formed – a triangular pattern.

After the end of the first wing the price goes down again – to the level close to the lower corner of the first “wing”. The price does not necessarily have to reach the same level as in the first wing. The angle of the second wing may be slightly higher or lower. But visually it forms the second triangle. The subsequent bounce continues until the price rises higher than the point of convergence of the two “wings”. After that, the pattern is formed.

The standard “Gartley’s butterfly” implies that the distance from the second point to the third is approximately equal to the distance from the fourth point to the fifth. In harmonic patterns, this principle is known as “AB=CD”. In this case, if you draw segments between AB and CD, they will be placed almost parallel (perhaps not perfectly, but approximately).

The first point is denoted as “X”. If the segment from X to A goes from the bottom to the top and from C to D goes from the top to the bottom, such a butterfly is considered “bull”. After it is formed the growth of the instrument price is expected. If the ray from X to A goes downward, and from C to D goes upward, the butterfly is bearish and causes the price to fall.

An important point is the proportions of the butterfly. They depend on the ratio of corrections. The ideal pattern has an XB of 0.61, AC of 0.78, BD of 1.27 and XD of 0.78. Many trading/analytical platforms (for example, TradingView) have special tools that allow building “XABCD” patterns and automatically calculate the correction parameters.

Bat

The “Bat” figure also belongs to the harmonic patterns. Visually, the bat resembles the “Gartley’s Butterfly”, but with different construction parameters.

“Bull” bat consists of two triangles, whose sharp corners face upwards (points A and C). The line from X to A goes from bottom to top, and from C to D – from top to bottom. The “bear” bat has its angles facing downward, the line XA goes downward from the top, and the line CD goes upward from the bottom.

Visually, the bat differs from the Gartley’s Butterfly by its narrower “wings”, especially at points A and C. The ideal proportions of this pattern by correlation: XB – from 0.32 to 0.50, BD – from 1.61 to 2.61, AC – from 0.38 to 0.88. The most important segment is XD. Here the ideal correlation parameter is 0.886. That is, the price of point D correlates with the price of point X by 0.886%. In other words – the candlestick, forming the point X, is a little higher than the candlestick of the point D in a “bearish” pattern. And a bit lower if the pattern is bullish.

The Crab

The harmonic pattern “Crab” can herald the appearance of a downward or upward trend in prices, depending on the position of the pattern. A “Bullish” crab is a pattern of five points where the first point is higher than the fifth point. The other three points are higher than the line drawn between the first and fifth. The segment drawn from the first to the second point goes upward. From the fourth to the fifth point it goes down. The “bear” crab has the first and fifth points higher than the others. The line from the first to the second point goes downward, from the fourth to the fifth point goes upward.

The “crab” can be distinguished from the “bat” by paying attention to the central point (the third, B). If you draw a conventional line X-D, the point B in the “crab” will be noticeably lower than this line and closer to the “floor” of the figure in the “bearish” variant and to the “ceiling” in the “bull” one. In the “bat” the point B is much closer to the center of the figure.

The ideal proportions of the correlation levels: XB – 0.38 to 0.61, BD – 2.24 to 4.23, AC – 0.38 to 0.88. The ideal XD correlation ratio is 1.618.

Shark

Shark is a pattern close to the “Butterfly” and “Bat” patterns. The key difference of the “Shark” is that the last point is much higher than the starting point. The figure is slightly shifted visually.

If you draw conditional lines from the first point to the second, from the second to the fifth and from the fifth to the first, you get a narrow triangle with an acute angle at the last point of the figure. The “Shark” points are usually designated as 0XABC (in other harmonic patterns – XABCD). This is due to the fact that “Shark” can go into a 5-0 pattern. Accordingly, the 5-0 pattern will start from point X, the second point of the “Shark”.

The ideal Shark has the following proportions of correlation: XB – 1.13 to 1.61, AC – 1.61 to 2.24, 0C – 1.13. For a “bull” Shark the segment 0C is at the bottom of the figure. The line 0X goes from the bottom to the top, the line BC goes from the top to the bottom. Point B is above point X, point A is below points X and B. The “bearish” Shark has the 0X line going down from above, the BC line going up from below. Point B is below point X, point A is above points X and B. The segment 0C is placed in the upper part of the figure.

5-0
The “5-0” pattern is five points spaced on the chart extrema, taking into account the correlation, between individual points. It is marked by XABCD points.
Pattern “5-0”, patterns of technical analysis
The pattern “5-0”, shown in purple
In a bearish pattern, the starting point (X) is placed higher than the second point (A) and forms the first triangle together with the third point (B). B is placed well above A, at the price high. The next points C and D are placed at the next minimum and maximum. Two triangles are formed, XAB and BCD.
Patterns 5-0 and Shark in technical analysis
The “5-0” pattern, combined with the “Shark” pattern. 0 – the first “Shark” point, X – the first “5-0” point. C – last “Shark” point, D – last “5-0” point. Shown on the left is a “bullish” version of 5-0, on the right – a “bearish” version.
Unlike other harmonic patterns, triangles can be visually very different, both in the direction of acute angles and in “area”. “Bullish” variant is formed mirror-like: X is below A, A is above B. The segment AC is in the upper part of the figure, BD is in the lower part.

The following correction parameters are necessary for the correct formation of the figure: the segment XB – from 1.13 to 1.61, AC – from 1.61 to 2.24. The BD segment should be close to a value of 0.50.

Conclusion

Patterns help a trader to predict the market development and price changes for an instrument. Technical analysis patterns do not guarantee the market development in the n-direction. Nevertheless, technical analysis is used in trading along with fundamental analysis, as it gives traders a deeper understanding of the market.

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How to conduct a technical analysis

Perhaps for newbies, the rules that govern technical analysis may seem too complicated at first. It is for such beginners that we have compiled this collection of basic knowledge necessary to get a more confident grasp of what technical charts, price trends and various indicators are. Of course, it is impossible to grasp the immensity in one article, but we will list the most popular technical analysis tools that are used by traders on both cryptocurrency and traditional markets. By and large, technical analysis is an analytical process that refers to anything that can be measured and attempts to systematize based on a sufficient amount of available market data. Such historical data is displayed on a technical chart.

Charts

If you are reading this, you probably have at least a general idea of what market charts look like. Nevertheless, let’s go over their basic characteristics again and those elements that are necessarily inherent in any type of technical chart, no matter what they look like. These elements include: (1) the symbol of asset and timeframe (timeframe), (2) the field for indicators, (3) the axes, displaying the price values and time period, (4) the toolbar.

The symbol of an asset is a shortened version of its name in the market: for example, BTC for bitcoin, ETH for Ethereum, GOOG for Alphabet Inc. shares, etc. A timeframe represents a time unit, which is taken as a basis for constructing a chart of price movements. For example, 1 Day (1 day) means that each bar on a given chart represents the price dynamics within a single day. By changing the duration of the time interval, the trader can “change the setting”, as if zooming in or zooming out the image. Accordingly, he can see and compare the price behavior in the short or long term. These patterns can be very different from each other. Next we see a row of indicators. We will look at them in more detail below. For now, let us just say that they are essentially algorithms, which display market data in different ways and allow the trader to try to get more information about the current trends. The price and time axis are usually located on the right and at the bottom of the chart, respectively. Their name speaks for itself. Finally, the toolbar offers the trader a whole set of tools that allow you to impose various lines and other symbols and images on the price, which can more clearly identify/evaluate the current market trend. All of these tools will allow you not only to better understand yourself, but also to clearly show others what trends you have noticed on the price chart. As a rule, any chart will offer you a huge number of settings and parameters to personalize the chosen platform to your personal needs and requirements in the most efficient way. However, none of this will matter until you understand what all of these tools are for in the first place. The answer is simple: they are all aimed at identifying and determining the current price trend.

Trends

The key objective of technical analysis is to identify trends. Two things are important: a trader needs to know what is happening in the market right now and also try to find signals and indications of what will happen to the price next, what changes are waiting for it and when it might happen. Trends can last for hours or years, which is why using timeframes of different durations is a good help. This allows you to distract from the momentary distortions and look at the situation in the longer term. There are three types of trends: rising, falling and sideways. These names explain the price behavior of each trend exhaustively – but, again, the time horizon of a particular chart must be taken into account.

There is a popular expression among members of the crypto community: “Don’t like the bitcoin chart? Take a wider view!”. This is due to the fact that if you change the scale of the VTC chart to a longer term, you can always see that the currency is moving in an uptrend. Zoom in closer and the dynamics of bitcoin over the last 2 years might make you question whether it is such a promising asset. So, it is important to always remember that besides hourly and daily charts, there are also weekly and monthly charts. However, we must not forget something else: no trend lasts forever. As technical analysts say, “a trend is your friend until it isn’t.” This is why it is so important to be able to predict the moment of a potential trend reversal – and this is what the analysis does. Of course, there is no one hundred percent guarantee for any prediction. It is only a question of the degree of probability of this or that scenario, so treat it simply as a weather forecast.

Turning Patterns

So, all traders seek to anticipate the moment of the coming trend reversal, so they always look for patterns that traditionally precede a change in market sentiment. One such pattern for many analysts is the head-and-shoulders pattern. It can appear on the chart in the background of both the upward and downward trend and become a signal of the end of the further price movement in this direction. The pattern got its name due to its characteristic appearance. In the frame of this pattern the price makes three consecutive peaks, the first and the third one (“shoulders”) look approximately equal and more modest than the second maximum (“head”). Such a model may not always look absolutely chrestomatically and symmetrically but many traders strive to find it on the price charts.

Do not forget that such a model may be formed on the chart and inverted. In this case, it may be a harbinger of completion of the downtrend and the soon transition to the growth phase. However, this is not the only way to predict the future price behavior.

Indicators

As we mentioned above, indicators are a way of passing the available market data through various algorithms. As a result, they can provide new useful information about the market trend. One of the most popular indicators is the moving average (MA). It analyzes the behavior of quotations for a certain number of days and presents the average price indicator for the period in the form of a line on the chart. As a rule, traders regard these lines as expected support or resistance areas. On the daily chart, the 50, 100 and 200-day MAs are most commonly used and are considered indications of a possible trend change. In general, an increase in price above the MA is a bullish signal, while a decline under such a line is a bearish one. Also, an additional weight to these lines gives their intersection on the long-term timeframes. Various traders use many different variations of MA as part of their own individual strategies.

Another widely used indicator for estimating the strength of the current trend and its possible reversal levels is the MACD (Moving Average Convergence Divergence). It is based on comparison of two MA moving averages (shorter and longer) superimposed on a chart and assesses the dynamics of their mutual position (convergence/divergence). As a rule, when working with this indicator you will see blue and red lines (though other colors are sometimes used), as well as bars, showing the distance between these lines. A bullish trend requires the blue line to be above the red, while a bearish trend requires it to be the other way around. Traders are most interested in the crossing of these lines, which is often a signal of a change in trend. Also, if there is significant divergence between the lines on the chart, it can indicate an overbought or oversold market. Finally, the MACD indicator can confirm the continuation of the current trend – if the lines attempt to cross, but instead bounce off each other.

Other popular trend indicators include the Relative Strength Index (RSI) and the Bollinger Bands. In any case, you should remember that none of the above-mentioned indicators is able to give you a 100% guarantee that the price will behave exactly as you expect. Indicators merely provide information which either confirms or questions some trading strategy you have developed. In addition, the use of multiple indicators will allow you to get more reliable trading signals about where the market is moving now.

Conclusions

We have reviewed only the tip of the iceberg, which is the technical analysis of the market, and considered the basic elements necessary for every beginner trader for successful and profitable trading. Nevertheless, these basic blocks will be presented on any popular trading platform. You can dive into the depths of the analysis for a long time, but there are many traders who prefer to do only the minimum set of simple tools, consisting of several indicators and trend lines. There is nothing wrong with that. After getting acquainted with the offered range, everyone is finally free to choose what he or she likes and develop his or her own strategy based on these tools.

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The success of trading is almost 100% dependent on the correct prediction. If a trader correctly determines the future price movement of an asset, he will open the right position at the right time and collect all the profits. But mistakes can lead to the total loss of capital. Technical analysis of the cryptocurrency will help to make a correct prediction. This material will talk about them.

Technical analysis of cryptocurrency

This is one of the most widespread and also quite accurate methods of forecasting. It is based on the rule that the situation in the market is constantly repeating. This is due to the fact that the psychology of market participants is the same and they act according to the same schemes. It means, if a rate has behaved the same way in one case, it will behave the same way in a similar situation. Of course, mistakes and contingencies happen. But these exceptions only confirm the rules.

The principle of technical analysis is quite simple:

• The trader chooses a trading terminal and the cryptocurrency pair he wants to trade. The terminal may look like a separate application or a service on the exchange’s website. That is, in any case, it has built-in tools for technical analysis.
• The cryptocurrency speculator overlays various tools on the chart depending on the strategy chosen. He sets support and resistance zones, smoothed curves, Elliott waves, etc. But each of the tools has its own rules of use, which are given in the description.
• Then, using the tools, he determines the pivot point and opens a trading position. The methods for determining the reversal points are also described in the trading instruments’ manuals.
• After that, the only thing left to do is to wait for the reversal signal in the opposite direction. As soon as it appears, it is necessary to close the position and fix the profit.

Technical analysis can be applied manually or with the help of special utilities. They can be downloaded from the Internet. But it is necessary to carefully analyze such programs in order not to get caught by cheaters.

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