Traders are always trying to find an edge in order to predict market trends and patterns. Many identify this edge by learning effective rules and tools to become a technical analyst.

A technical analyst tries to predict the future price of an asset solely by identifying patterns in historical price changes. In this article, we look at some of the typical patterns used by a technical analyst.

There are three main categories of patterns: Head and Shoulder, Triangle and Wedge. So for newbies, what does this mean?

Head and Shoulders

The image above illustrates when the baseline has three peaks as shown in the photo above.

As you can see, the middle triangle is higher than the outside triangles. This means that when spotted, you can potentially predict when an uptrend is nearing its end. This formation can occur from either a bullish or bearish trend.

It can be inverse as well, which signals bear to bull reversal from the image above.

Triangles

There are three types of triangles:

Ascending

Descending

Symmetrical

Ascending Triangles

The ascending triangle is formed by two lines. One horizontal line, that connects multiple highs and one ascending line connecting multiple lows. The ascending triangle means that traders are bullish on the asset and trying to break through the resistance. Price above horizontal line signals breakout through resistance and is considered a bullish signal. In the image, we can see breakout the few candles after point D and then big movement upwards.

Descending Triangle

The best example of a descending triangle was the 2018 bubble pop as seen from the image. When an extenuating upward trend keeps going, it then peaks followed by a descending trend. You can see smaller versions of this too within a timeframe.

Symmetrical Triangle

This is usually the most common, but also can be unpredictable as the movement zig-zags in a slowly descending fashion. It’s important to know that this usually happens when trading volume begins decreasing as traders are unsure where to buy and sell.

Wedges

When we look at wedges, there are two types:

Rising wedges

Falling wedges

Rising Wedge

With a rising wedge, you see the price swing from highs and lows with a steady rise. From this, traders can predict a cliff drop off when a downward break occurs.

Falling Wedge

A falling wedge can be considered almost a mirror image of the rising wedge. This is when traders try to predict the bottom to then hold at a long position.

Technical Analysis Flaws

Often times influencer tweets can, in fact, go against technical analysis. Take into account an example from John McAfee, a prominent crypto influencer.

Here he is promoting specific coins, which in turn has his followers taking action from his advice. In a way, this is a technical analysts nightmare, as the mood of public opinion trading becomes driven by media/influencer reporting. This creates wrong readings for an analyst’s pattern predictions. So how can this be solved? This is where Cryptomood comes in.

With its 50,000 data feed, Cryptomood aggregates all news sources around crypto and social media influencer input, identifying the mood of the news and social media.

These indicators show the correlation accurately and in real-time on the charts, allowing you to assess a pattern along with the mood of public perception. We like to think of ourselves as a traders dream tool to assess their technical analysis at the fullest.

Join our Telegram group to get more updates and feel free to download our app on both Google Play and IOS. For the desktop version, please visit pro.cryptomood.com.

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