One of the most frequently used indicators in crypto trading is the candlestick pattern. It is known to be a reliable tool in determining whether the market is in a bullish or bearish trend. It is also considered a basic tool as these patterns are easy to read. In one of our articles, we covered a list of candlestick patterns that indicates a bullish trend. This time, we will feature the patterns that signal a bearish trend. Knowing your candlestick patterns whether it’s bullish or bearish will guide you to trade your digital assets wisely.
Contrary to its name, the shooting star pattern does not indicate a bullish trend but a bearish one. How do you determine one? This pattern consists of one candlestick with a small body and a lower wick with a very long upper wick. It occurs at the top of an uptrend. What does this pattern say? It indicates a strong price rejection after a significant price push. The bullish version of the shooting star is the inverted hammer.
Evening Star Pattern
This pattern is used to predict future downward price reversal. It is considered a reliable indicator for traders. The opposite of the evening star is the morning star pattern. How to spot one? This pattern is consists of three uptrend candles. The first candle is bullish, followed by the next candle which is the star with very long wicks and a short body. The last candle on the set is bearish that closes at the midpoint of the first candle. When you see one, this means that the current trend is getting weak and traders may decide to sell their crypto assets. The confirmation comes with the third candle going on a downward trend.
Dark Cloud Cover Pattern
This candlestick pattern reveals a shift of momentum from uptrend to downtrend. It is composed of a bearish candle that opens above but then closes below the midpoint of the prior bullish candle which could indicate a pullback or a that an upward trend has ended.
Three Black Crows
People would often associate crows with death hence it is no wonder it is also used to signify a bearish trend in crypto. How do you recognize the “three black crows” pattern? It is composed of three red candlesticks inside of an uptrend and second third candles open within the body of the previous ones and close below it with little or no lower wicks.
Bearish Engulfing Pattern
A technical chart pattern that signals a lower price to come. It is composed of two candlesticks with the first candle being green and followed red candle engulfing it, with a relatively larger body. This pattern shows increased selling pressure and the start of a potential downward trend.
Hanging Man Pattern
This pattern occurs during an uptrend and signals a price reversal is about to happen as prices may start falling. This pattern is the equivalent of the hammer bullish pattern. It is composed of a small body, a long lower shadow, and a little or no upper wick. The hanging man pattern indicates that the selling interest is starting to increase.
Candlestick patterns are strong tools that can be used by crypto traders in performing a technical analysis. It works best with other indicators like RSI and Moving Average. Trading cryptocurrencies could be very enticing with some earning huge profits but have also caused others to lose everything. So, before you even start trading, make sure to invest only what you can afford to lose. Trading cryptocurrencies could be very risky, especially for beginners. Be sure to continue educating yourself. Keep track of your trades with a trading journal. Learning even just the basic technical analysis will guard you against FOMOs and FUDs in the market.