Trading cryptocurrency has gained quite a lot of popularity over the past few years because of the large volatility that crypto offers combined with the 24/7 availability of the market. One tool that crypto traders use is something called technical analysis, which is basically looking at the shape of the chart to predict the future price of the underlying cryptocurrency.
There are a lot of problems with using trading patterns to predict the price. The biggest problem being that recognizing these patterns often do not materialize with what you expect to happen in the future. That aside, here are the top 20 trading patterns in crypto.
- Head and shoulders
- Double bottom
- Double top
- Cup and handle
- Bart Simpson
- The Bottom Line
Are Trading Patterns Accurate Predictors?
Here’s the thing with trading patterns – they work great in hindsight, but they are not super accurate.
For instance, there are many situations when it looks like a Bart Simpson or double top pattern is forming, but the market decides to continue going down.
Traders have a tendency to forget about those situations. Instead, they only focus on the times that the pattern forms and ignore the times where it looks like a pattern forms, but never actually forms.
With that in mind, we will say that trading patterns are fairly accurate at predicting what the market will do. However, determining if a trading pattern is forming will prove to be the difficult part of the entire situation.
Bitcoin’s Relationship to Altcoins
One of the most noticeable trading patterns, if you can even call it a trading pattern, relates to the price of Bitcoin and altcoins.
If the price of Bitcoin drops, then altcoins will also drop. In fact, altcoins have a tendency to drop much more than Bitcoin. The inverse, altcoins rising with Bitcoin, does not always happen because plenty of altcoins have bad fundamentals, but it usually happens with solid altcoin projects.
You should be concerned if the greater crypto market is up and your altcoin has lost value against Bitcoin. The crypto market has a tendency to follow the lead of Bitcoin.
Can You Make Money Using Trading Patterns to Trade Crypto?
Yes, it’s certainly possible to make money trading cryptocurrency, especially in a bull market if you don’t use too much leverage. It’s also possible to lose money trading cryptocurrency.
You should ignore people that say stuff like, “You will lose money trading crypto, guaranteed.”
As for whether or not trading patterns can help you make money trading crypto, we’re sure it helps. But the thing with earning money trading crypto is that it’s more about risk management than timing the market.
Did your trade drop 2%?
It’s probably time to cut your losses and try again. You don’t want to hold a bag for too long and end up down a lot of money.
Did your trade go up 7%?
It’s tempting to hold and wait for more. But a profitable trader will close out a 7% gain without asking questions. This is especially true if they are about to stop trading for the day.
Profitable traders don’t get greedy and they know when to cut their losses and try again.
To summarize, it’s possible to make money using trading patterns to trade crypto. But the determining factor in a trader’s profit is mostly their risk management strategy. Trading without a proper risk management strategy is more akin to gambling than trading.
What Cryptocurrency to Trade?
Picking the right cryptocurrency to trade mostly comes down to personal preference. Of course, we recommend choosing a popular cryptocurrency because it will have more trading volume than an unpopular one, but that’s really it.
You should also not trade stablecoins for obvious reasons.
One last thing, you should familiarize yourself with how a particular cryptocurrency trades. Every cryptocurrency has its own trading pattern that you will begin to notice once you follow it for a decent amount of time.
This is why profitable traders have a tendency to specialize in one or two cryptocurrencies rather than trading 100 different cryptos.
So, that sums it up for 10 of the most popular trading patterns in crypto. You may notice we did not focus too much on the actual trading patterns.
That’s because the trading patterns are not all that important other than a very basic idea about them. Every cryptocurrency also has their own unique trading pattern.
Anyway, what’s more important when trading crypto is properly managing your risk and your emotions. Don’t get greedy and don’t let your emotions cloud your judgement.
The most profitable crypto traders rely more on a nearly robotic decision making process than a deep analysis of the charts.