Welcome to the Crypto Trading Group podcast, your go-to weekly guide on how to become a successful cryptotrader! Each week, we dive into the latest trends in the crypto market, providing in-depth analysis and updates to help you stay ahead. Whether you're just starting out or looking to sharpen your trading skills, this podcast is packed with valuable insights to boost your crypto journey.
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Disclaimer: This podcast is for educational purposes only. Trading cryptocurrencies comes with risk, and any trades you make are done at your own risk. Always do your own research before making any financial decisions.
Now, let’s get into lesson 13 of "how to become a cryptotrader!"
Today, we’re diving into the world of crypto trading and discussing an important pattern: the Head & Shoulders. This pattern can help traders identify potential bearish reversals in the market.
The Head & Shoulders pattern is a bearish signal that indicates a possible price decline.
- It is characterized by three consecutive peaks, with the middle one (the head) being the highest.
- The two outer peaks (the shoulders) are lower than the head and align closely in price.
- The line connecting these overlapping prices is called the neckline.
A key point to remember is that you should only place a trade after the Head & Shoulders pattern is fully formed and the neckline has been broken downward. Waiting for the full formation and neckline breakout increases the likelihood of a successful trade.
Sometimes, the Head & Shoulders pattern fails, for instance, when the volume deviates or the market consolidates instead of retracing. To increase your chances of success, here are three strategies:
- Wait for a retest: After the neckline breaks, the price may return to test the neckline. This creates a good entry point for shorting.
- High volume breakout: A neckline breakout with high volume is a strong signal and can provide a safe entry even without a retest.
- High momentum breakout: If the neckline breakout coincides with the breakdown of previous support, a short entry may be taken without waiting for a retest.
To determine your target, measure the distance between the neckline and the lowest point of the head. This distance is then projected downward from the neckline to estimate the potential price target.
The Head & Shoulders is a powerful pattern with a high probability of success, but it’s important to wait for confirmation rather than anticipating the pattern. Also, pay close attention to the volume during the breakdown, as this can provide additional insights into the strength of the move.
In this episode, we’ll dive deeper into the specifics of the Head & Shoulders pattern and discuss how you can use it to enhance your crypto trading strategy.