This is something you experience frequently when browsing through the Cryptocurrency markets, when looking through the Altcoins charts.
That is a consolidation pattern.
This is a consolidation pattern because even though we have higher lows we also have lower highs and we can see prices converging to a final point at the end of the triangle.
Is it more likely for this pattern which is neutral in nature to break bearish or bullish?
How to know if this pattern is more likely to break down rather than break up?
Two points mainly:
- Volume. If you notice the volume lines at the bottom of the chart, the green lines are overall bigger than the red ones. While we have lower highs, the trading volume tends to increase when a higher low is produced and the green lines are all bigger than the red ones.
- The overall market. Looking at other Altcoins, we have hundreds of pairs that already broke to the upside and are trading above major long-term resistance levels. Getting a feel of the overall market can help you determine which side has the highest probability. Since most of the market is breaking bullish, the chances are this pair will break bullish as well.
That’s it in a nutshell, simplified.
Even though we reached the conclusion that a bullish breakout is more likely to take place, a trader would still prepare for all scenarios, meaning, a trader would have a plan ready for what to do if the pattern breaks down rather than up.
Continue holding or sell at a loss?
If I decide to continue holding, for how long am I prepared to hold?
Will I hold based on time duration, 3 months, 6 months, 1 year etc. or based on the price?
Being prepared before-hand can help you avoid surprises if things don’t go your way.
We can read all the charts we want, but the markets are always changing and what looks good now can become something completely different in matter of months, weeks and sometimes even days.
On a crash, I just hold long-term.
Others use a stop-loss… Whatever you do, just make sure to plan ahead.
Prepare for the future.
Where will I be 10 years from now?
What type of work/service will I be doing 5 years from now?
Will I be living in the same place?
Where was I 5 years ago, 10 years ago?
How has everything changed?
How did I feel back then and what were my expections, how did it all turn out?
Life goes on and on… Get it done now, enjoy the rest.
Leave a Reply