How to identify the reversal models in the price action
The cryptocurrency markets were known for their high volatility and unpredictable price movements. One of the key strategies used by traders and investors is to identify the reversal models in the price action. In this article, we will explore how to identify the reversal models in the policy prices of the cryptocurrency using various technical indicators and techniques of graphic analysis.
What are the reversal models?
The reversal models refer to the repetitive repetition of a specific model of price movement indicating a potential inversion of the current trend. These schemes can be identified on various times, from a few to years. The reversal models occur when the price reaches a certain level and therefore begins to move in the opposite direction.
Types of inversion models
There are different types of reversal models that traders are looking for:
- head and shoulders (h & s) : a classic model that is formed when the price reaches a high, forms a head, followed by a lower minimum.
- Inverted triangle : a triangle motif with a side that forms a bottom or a higher part.
- Superior double/double bottom : two maximum or minimum consecutive at the same level.
- Stendardo pattern : a narrow and symmetrical shape that can indicate an inversion.
How to identify the reversal models in the action of the cryptocurrency price
Here are some steps you can follow to identify the reversal models in the action of the cryptocurrency price:
- Choose a trading plan : before starting your trading strategy, it is essential to have a clear floor to identify the review models.
- Use graphic analysis tools : use graphic analysis tools such as candle graphics, graphic lines and furniture to view price movements.
- Identify the trendy inversions : search for signs of trendy inversions, including the formation of the head and shoulders, inverted triangles, double top/buttons and motifs of recovery.
- Analyze the candelabra : analyze the models of candelabra, such as swallowing candles, doji candles and swallow the swallowed candles, to identify potential reversal points.
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- Search for confirmation signals : Search for confirmation signals on other times or graphic models to validate the reversal signal.
Example of a reversal model in the action of the cryptocurrency price
We consider an example of a head and shoulders model in the action of Bitcoin prices:
- A simple mobile line is drawn to 14 periods (SMA) and forms a bass.
- The price reaches a high and then goes down.
- The price forms a head with two lower maximums.
- The price begins to move upwards while the head approaches.
In this case, the head and shoulders model indicates that the price has reversed from a downward tendency to a tendency to rise. This reversal model can be used to buy or sell cryptocurrency activities.
Tips and variants
Here are some suggestions and variants to identify the reversal models in the action of cryptocurrency prices:
* Use more time
: use more time, such as 1 hour and 4 hours graphics, to identify potential reversal points.
* Combine the indicators : combine more indicators, such as RSI and MacD, to confirm the signals of reversal.
* Search Pattern repetitions : look for repetitions, in which the same model occurs for a period of time.
* Use volume candles : use volume candles to identify potential reversal points.
Conclusion
The identification of reversal models in the action of cryptocurrency prices can be a challenge, but it is essential for traders and investors who wish to make informed investment decisions. Using technical indicators and graphic analysis techniques, it is possible to increase the possibilities to identify profitable trading opportunities.