Learn how to trade crypto by identifying trend reversal patterns like tweezer top and bottom candlestick patterns.

Technical analysis is important not just for timing the market, but for helping investors identify market conditions and adapt to the volatility that’s driving today’s market. One of the core 

 components is chart patterns — such as the tweezer top and bottom, which help traders understand market sentiment.

The tweezer top and bottom are combinations of multiple candlesticks which usually appear at the end of an uptrend and downtrend, respectively, signaling a trend reversal. Therefore, investors can buy and sell a crypto asset more precisely by observing how these patterns appear on a chart. The following section includes a complete trading guide on using the tweezer top and bottom candlestick patterns in the cryptocurrency market, including a recommended buying and selling method.

What Are Tweezer Tops and Tweezer Bottoms?

A tweezer top is a combination of bullish and bearish candlesticks at a swing high that indicates a possible bearish pressure. In contrast, a tweezer bottom is a bullish reversal pattern at a swing low, showing possible bullish direction in price.

As the tweezer candlestick has both bullish and bearish formations, crypto investors can use it to identify both entry and exit levels, respectively. The tweezer top pattern appears at the top of a bullish trend, and indicates that bears have become interested in the price. As a result, it provides a sign that bulls should close their positions because there’s a high chance of a trend reversal.

The tweezer top pattern consists of a bullish daily candle followed by a bearish daily candle.

The tweezer top pattern tells a strong market story, as the existing bullish trend forms a solid green candle at a swing high. However, on the next day, the price drops lower instead of moving up, and closes the day with a bearish candle — indicating that bears have found the price to be discounted, and are interested in opening a sell position. 

Now, let’s move to the tweezer bottom pattern, which is the opposite of the tweezer top. It appears at the bottom of a swing low, and indicates a bullish reversal.

The tweezer bottom pattern consists of a bearish daily candle followed by a bullish daily candle.

In cryptocurrency trading, the tweezer bottom pattern is significant because it’s directly related to a trading entry. It appears at a swing low with a strong bearish daily candle, indicating that bears are aggressive in the price. However, the price rebounds higher on the next day, due to buyers’ interest. Therefore, as soon as the second candle closes, investors may consider it a buying opportunity.

Pros and Cons: Using Tweezer Top and Bottom Patterns

Let’s look at the pros of the tweezer top and bottom patterns:

There are also some downsides to using the tweezer top and bottom patterns:

Spotting tweezer top and bottom patterns on a naked chart are easy. Each version of the pattern consists of two long-bodied candlesticks, appearing in parallel but opposite directions. 

Finding a solid trend is the primary requirement for the tweezer trading method. When the market is moving up, prices continue to increase. However, a sudden bearish candlestick similar to the latest bullish candlestick appears and negates the bullish momentum. This is how a tweezer top pattern appears, indicating a bearish pressure.

The above image illustrates the primary way to identify the tweezer top pattern in an uptrend market.

The tweezer bottom pattern is the opposite version of the tweezer top and appears in a downtrending market. Price keeps moving down when suddenly, a bullish candlestick appears which seems similar in size to the previous bearish candle. As a result, a tweezer bottom forms, indicating a possible bullish trend.

The above image illustrates the primary way to identify the tweezer bottom pattern in a downtrending market.

Let’s review the key characteristics of the tweezer top and bottom patterns:

The tweezer candlestick is a reversal pattern, so investors should identify where the trend is heading before making a trade. Uptrending and downtrending markets are easy enough to identify by looking at swing levels. Therefore, investors should know how higher highs and lower lows form in the price chart.

Now, let’s move to the step-by-step approach to make a trade using the tweezer pattern:

 After finding the market trend, investors can spot the point of interest area, which is the supply or demand zone from which the price showed a strong reaction before. Therefore, investors should mark critical levels from where a significant market reversal may occur.

The above image shows how support and resistance levels look at the top and bottom of a trend.

 After finding swing levels, identify the tweezer top from the resistance level, and the tweezer bottom from the support level. Make sure that the trading entry is valid once the second candle has closed.

The above image shows how the tweezer bottom appears at the support level, offering a fantastic bullish reversal. As the tweezer is a trend reversal method, traders can enter right at the start of a new trend. In this way, the tweezer can offer a higher return against a small risk. The ideal stop-loss level is below the tweezer bottom low (with some buffer).

Now, let’s look at an example of a tweezer top pattern from an actual chart:

In the above daily LTC/USD chart, the price moves up and forms a tweezer top pattern at the resistance level. Accordingly, the price moves lower with a decent profit. Using this method, the sell entry is valid from the second candle’s closing, and the stop-loss should be set above the first candle’s high.

How Reliable are Tweezer Tops and Bottoms?

In financial trading, investors are advised to use multiple methods to increase the probability of a trading entry. Using tweezer patterns are a reliable way to catch a trend from its beginning. But can a trader rely only on the tweezer method in order to make a successful trade?

When a tweezer top appears at a swing high, it indicates that bulls are getting out of the market — and bears may be taking over. The reverse is true for a tweezer bottom at a swing low. Therefore, investors should manage their trades by closing a profit and moving the stop-loss to break-even. Overall, the tweezer trading method is profitable — provided that traders can match this pattern with other signals for additional confirmation like support, resistance, market context, volume or trend. 

Tweezer Candlestick vs. Other Trend Reversal Patterns

Let’s compare the tweezer candlestick with other patterns, so that investors can make more strategic trading decisions.

The head and shoulders pattern is a series of price actions that explains how and where bulls are failing to regain momentum as bears take control over the price. However, this method needs considerable time to complete, as the trading entry only becomes valid once the price breaks out from the “neckline.”

The above BTC/USD chart shows a head and shoulders pattern forming. It becomes valid after breaking below the neckline. However, this is a daily chart, and it takes almost two months to complete the pattern. Therefore, investors who focus on using the 

 in their trading have fewer trading opportunities than the tweezer top offers.

 are reversal patterns which form at swing lows and swing highs, respectively. The main difference between these patterns and the tweezers is that morning and evening stars have three candlesticks, which can explain investors’ sentiment more accurately than tweezers patterns, which have only two.

The above idealized images show the morning star and evening star patterns. The morning star pattern features a strong bearish daily candle, indicating a significant selling pressure in the price. The small bearish daily candle which follows it indicates that the price is still in bear territory, but with weak momentum. 

Finally, a large bullish daily candle closes at the first day’s high on the third day. The weakness of sellers and the strength of buyers is the major indication of the price reversal.

In tweezer patterns, comparable price action occurs, but it takes two days to change the momentum instead of three. Therefore, we can consider morning stars and tweezer patterns to be similar indicators, since both of these patterns feature a strong price reversal. If a price reversal takes too long for a tweezer pattern to emerge, it may still form a morning or evening star pattern.

 is a bullish reversal pattern which appears at a swing low. This pattern starts with a bearish daily candle, which attracts sellers. However, a small bullish candle appears the next day, which can be thought of as a correction to the previous bearish candle. Two consecutive bullish candles appear on the next two days, closing the action above the first day’s high. It’s clear that the selling momentum on the first day is eliminated with three bullish candles which close the third day above the first candle’s high.

Let’s see what the three white soldiers pattern looks like:

Both the three white soldiers and tweezer bottom candlestick patterns are bullish reversal patterns. Once they appear at a support level, the price becomes attractive to bulls. Again, these patterns have a high level of accuracy, but investors should consider other confirmation from trend, volume, price context, etc.

The tweezer top and bottom candlestick patterns yield reliable exit and entry points, respectively, in any trend-reversal trading strategy. Therefore, the best approach for using this indicator is to combine it with other technical analysis indicators to increase its efficiency. However, before following these candlestick patterns with real money, it’s recommended that investors practice using a demo account.

When using the tweezer candlestick patterns for trading, keep in mind the following rules:

Candlestick Patterns Professional Traders Use

 – A curated list of candlestick patterns most frequently used by traders

 – Learn the basics of candlestick patterns

 (Chart basics: trend, neckline, wedges)

Intermediate

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How to Use Tweezer Top and Bottom Candlestick Patterns in Crypto

Did you know it is possible to predict the market by reading the candlestick chart? Here's how you can translate these patterns into profits!

Did you know candlestick charts appeared over three centuries ago?

The candlestick chart was invented in the 1700s by a Japanese rice trader — Munehisa Homma. He uses the candlestick elements (Open High and Close Low) to represent the price in the trading period.

Today, almost all financial markets rely on candlestick charts as a price representation.

Read on as we decipher the ins and outs of candlestick charts.

A candlestick chart is a combination of multiple candles a trader uses to anticipate the price movement in any market. In other words, a candlestick chart is a technical tool that gives traders a complete visual representation of how the price has moved over a given period.

Candlestick is a crucial price action tool that shows detailed information about the price, including the open, close, high, and low for a particular time frame. Still, it’s confused with when it’s compared side-by-side with a bar chart.

Here’s an example of the bar chart and candlestick chart:

The bar chart and the candlestick chart may look similar, but there’s indeed a difference. In a candlestick chart, the relationship between open and close is represented by the color of the body. In contrast, the bars have a single vertical line and two horizontal lines on either side of the vertical line.

 forms on a price chart, crypto traders can anticipate 

 or reversals. Therefore, a single candlestick and a group of candlesticks are essential to define a 

Firstly, let’s have a look at a visual look of a candlestick:

 where the price is opened one direction and closed to the opposite direction. 

The main body is the broader part of the candlestick that shows the opening and closing price. In a bullish candle, the opening price should be below the closing price. That indicates the price has risen over that period. 

On the other hand, the opening price should be above the closing price in a bearish candle. That shows the price has decreased during that period.

The size of the body represents the market pressure. An extended length indicates a strong movement, while a short length represents a minor price movement.

Now, let’s learn how to read the red and green candlesticks in any crypto pair.

 color or a buying pressure candle represents a 

. However, you can change the color at any time according to your choice and trading template. 

The wick is the thicker part of a candlestick attached to the above and below the candle body. The wick above the candlestick’s real body indicates the highest price level during the timeframe. Similar to the wick below, the candlestick body represents the lowest level of that specific timeframe.

Opening High and Closing Low Price (OHCL) Explained

The OHCL is a candlestick chart type that shows the open, high, close, and low prices for a particular time. 

The open price is the price level when the previous candle closes, and the current candle appears. Later on, the price will move up or down and will create a high or low. Lastly, when the candle closes at a price, it will point to a closing price. The future price of a candlestick stock depends on how these levels (OHCL) appeared. 

Let’s say the Bitcoin price moved above the $50,000 level on a particular day and made a high above the $50,000 crucial level. However, the price moved lower and closed the daily candle below the $50,000 level by forming Doji or Pinbar.

It means buyers tried to take the price above the $50,000 level but failed; thus, sellers took control over the price. It is a clear indication that the price failed to get stable above the $50,000 level, and it might be a good idea to sell now.

Each candlestick form patterns that traders can use to recognize major 

A great way to start is first to identify the candlestick patterns. Here’s what you need to know.

When Does a Candlestick Pattern Start to Show?

The candlestick pattern is a combination of some candlesticks representing a story about buyers and sellers for a particular time. However, the price movement in the financial market depends on supply and demand and traders’ emotions. As soon as the price reaches a resistance or support level, 

Therefore, when the price moves to a significant price zone, the candlestick pattern will become very important. 

For example, the high psychological level of $60,000 has become a strong resistance level that attracted many buyers and sellers.

See the chart below to learn how to read candlestick chart:

Here Bitcoin made an indecision candle near the significant round number $60,000, indicating a starting point of the pullback.

The price fell with an impulsive bearish pressure towards the downside.

So, what will you do if you find an appropriate candlestick pattern at a critical support or resistance level?

You should closely track the buyers’ and sellers’ activity and enter a trade once the direction is set. The best solution is to wait for an appropriate candlestick pattern at support or resistance levels and enter the trade after a rejection.

Understanding Candlestick Chart Patterns and Trends

The trends usually are represented by the ups and downs of an asset’s price on the candlestick chart. The high and low points of several small trends are grouped to form a more significant trend. 

It appears when a chart has new low points higher than the previous low while the new high points are higher than previous high points. During an upward trend, traders are confident to trade, and the market is generally bullish. 

As opposed to upward trends, a downward trend refers to a chart with new high points lower than previous high points and new low points also lower than previous low points. 

The prices in this trend do not go in one direction consistently. It switches between high and low, with the high and low points being relatively close to one another.

Candlesticks charts are like a book where a trader can easily read the price from left to right.

While it’s not technical to read it but there is a learning curve to analyzing the chart.

Here is how to read the candlestick chart:

There are no specific rules for this, but it is preferred to start reading candlesticks from the far left until you see the first candlestick. 

For example, if you are trading in a 15 minutes timeframe, you can see the last month’s data, but not before that.

You should focus on the speed of the trend and candlesticks formation at the end of the trend.

Let’s have a look at a practical example for a better understanding:

Here we can see the daily chart of Bitcoin, where the price started to move higher with a 

. Later on, the trend becomes corrective and moves lower. After that, the price forms another bullish engulfing, and the price moved higher and formed a new high.

Still, the best way to interpret the data of a candlestick chart is by using technical tools like a (

To read the candlestick chart accurately, you should: 

 located at key support and resistance level

Timeframes are an essential tool for traders. Although candlesticks patterns in all timeframes come from the price movement, there is technically no difference in higher or lower timeframes.

However, higher time frames always provide a more accurate price direction than the lower timeframe. Therefore, if you intra-trade any cryptocurrencies, you should see the price direction daily or H4 candles. When the lower timeframe and higher time frames match the direction, you can find profitable trades.

We have learned that a Hammer is a reversal candlestick but does it mean to sell immediately as soon as you see a Hammer candlestick in the chart?

Candlestick patterns at a random place on your price chart do not provide highly accurate signals. However, a candlestick pattern within the trend and at a perfect location can provide high probability trades.

Therefore, you should always look out for the 

 in the chart. Moreover, it would help if you considered the market context and the overall environment to increase success odds.

We can see a Bullish Engulfing pattern at the $10,000 level of BTCUSD in the above image. However, after the Bullish Engulfing Bar, a Bullish Shooting Star appeared, and it failed. 

It’s because it is at a random place instead of a support or resistance zone. To add on, you should also consider:

The price chart sample above shows that ETHUSD the four different nature of the trend is marked. If you can match the context with the candlestick formation, you can easily define the possible price movement in any asset.

How to Place a Stop-loss and Take Profit on a Pattern?

 tool for crypto trading to limit your losses on an open position that makes an unfavorable move. The key advantage of using a stop-loss order is to help you cut out losses without having to monitor your asset daily. And without a stop-loss, you are practically risking your investments.

The ideal place for setting a stop-loss is below or above the candles low/high with some buffer.

For example, we can see a Hanging Man formed at a critical support level, indicating a potential bullish movement in the price. The 

 with some buffer, and the take profit would be near the resistance level.

There’s no denying that candlestick patterns plays a significant role in technical trading. A candlestick pattern is especially useful for traders to determine the possible price movement and market trends based on the past patterns. 

Of course, there is also a variety of candlestick patterns that signal bullish and bearish movements. But, what are the best candlesticks? 

Beginner

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How To Read Candlestick Charts In Crypto Trading Like a Pro

Keen on timing your exit from the volatile crypto market? Learn how to use evening star patterns to easily identify bearish reversals.

When the crypto market corrects, it typically becomes volatile. Traders need a process to alert them to a potential correction so they can prepare for the volatility. 

, or identifying patterns and trends in market data, is the most common way for crypto traders to develop bearish alerts. Japanese candlestick patterns like the evening star pattern are popular because they can help traders exit a bullish position to lock in profits or generate a new short-sell position.

In this article, we’ll look at the candlestick pattern known as the evening star and see how to trade it.

What Is an Evening Star Candlestick Pattern? 

An evening star candlestick pattern is a three-candle formation used in technical analysis to identify bearish reversals. It consists of a large green candle, a second small-bodied candle, and a third large red candle.

The first candle of the evening star pattern is a large green candle, which suggests the bulls have complete control, pushing the market to a new high.

The next candle continues to run up to higher levels, but the strength behind the move is lacking, so the candle has a smaller body. Ideally, the second candle should gap higher on the open, but since crypto trades continuously — 24 hours a day, 7 days a week — gaps are rare on price charts.

As the market begins to sell off, it produces a large red candle. Often, the gains witnessed by the first candle have evaporated by the time this third candle completes.

These three candles together provide crypto traders with important clues about larger trends for the crypto market. The evening star pattern is generally found at the end of an uptrend, signifying the kickoff to a bearish reversal.

Strengths and Weaknesses of the Evening Star Pattern

The evening star is an effective pattern, making it a favorite of crypto traders as it helps them identify a bearish turn in the market.

One unique aspect of the evening star is that it requires three candles to generate. This makes the formation easier to identify because the candles must take a specific shape.

Additionally, crypto traders like the evening star because it helps them exit a bull market to protect profits. Once the pattern is confirmed, a trader closes all or a portion of their position.

If the trader feels a larger bear trend is going to unfold, they can consider opening a short-sell position with a stop-loss placed above the high of the pattern. Prudent risk management suggests targeting twice the distance from the entry to the stop-loss to generate a 1:2 risk-to-reward ratio.

There is no pattern or indicator that’s foolproof, and the same holds true for the evening star. Just because the pattern appears doesn’t mean that the next price move is going to be a downtrend. There are occasions when the evening star pattern may generate false signals and the market might actually rally.

One way to minimize the number of false signals is to more completely understand the pattern, its shape, and how to trade it — which we’ll explain further below.

How to Easily Identify Evening Star Patterns

The evening star formation is relatively easy to identify because there are three candles working together to tell you a story. The context and backdrop of the story are that the pattern appears after the market has already experienced an uptrend.

The first candle of the pattern appears with a large green (or white) body to extend the current uptrend. Toward the end of strong trends, FOMO can kick in: as the trend accelerates, traders and investors jump on board, afraid of missing out.

As the first candle closes, the second candle continues initially with another slight gain. However, the strength from the previous candle is losing momentum. Many of the traders have joined the trend and the buying power is diminishing.

As a result, the market produces a small-bodied candle as the battle between the buyers and sellers is fairly even. At this point, the candle could be red or green. Either one is okay, as it’s more about the small range of the candle, relative to the previous green bar.

However, it’s critical that this small-bodied candle punches a new high above the first candle. It’s this small-bodied candle that resembles a star in the night sky, giving the formation its name.

Then the third candle appears. Ideally, the third candle begins correcting lower, holding below the high of the second candle. The bullish momentum has completely dissipated from the first two candles, and the sellers take over while the buyers are nowhere to be found. As a result, the market corrects lower, fairly swiftly, erasing nearly all of the gains for the previous two candles.

Once the evening star pattern is identified, it’s fairly easy to use the formation to help you enter into new positions — or help you exit out of an existing trend. The evening star candlestick pattern signals a bearish reversal. Therefore, it can be used to initiate new short-sell positions.

In the daily BTC/USD chart above, we see the price moving up to meet the resistance at a previous swing high. Bitcoin’s price drives the first candle of the evening star pattern higher to meet this resistance level.

Then, the second candle jumps to a new high, but there aren’t enough buyers for the breakout higher to follow through, leaving behind a smaller-bodied candle. As the third candle begins to form, sellers emerge, driving Bitcoin’s price lower and starting the leg of another correction.

Once this pattern is spotted, especially near previous resistance, it signals a bear trend is about to take over. A trader would enter short on the opening of the next candle, while placing a 

To establish the target zone, take the distance between the entry to the stop-loss and multiply it by two. This product will be the distance to your target from your entry.

A couple of days later, Bitcoin corrected lower, reaching the target established by the pattern.

Using the evening star pattern to initiate new short positions isn’t the only way to implement a strategy. For traders who are positioned to the long side, the appearance of an evening star candlestick formation will signal the potential for the uptrend to terminate and reverse, starting a new downtrend.

In late February 2021, a trader positioned to buy the dip would be riding the trend higher. LINK/USDT has increased by about 40% over the past couple of weeks, reaching a new high on March 3.

However, LINK/USDT drives even higher in what appears to be a breakout attempt, forming the first candle of the evening star formation. The second candle consolidates those gains, and the breakout attempt fails to follow through, leaving behind a smaller-bodied candle.

As the third candle forms, LINK/USDT begins to correct even further, nullifying the breakout and sealing it as a false break higher.

Once this pattern is completed, especially near the previous swing high from March 3 (which was acting as resistance), then we have multiple confirmations signaling the kickoff to another correction. At this point, the long trader may decide to close their position to lock in profits.

After the evening star pattern is confirmed, LINK/USDT corrects 23%. The evening star pattern can be effective at helping traders exit long positions, as it signals a bearish reversal may be nearby. 

How Reliable Is the Evening Star Pattern?

By itself, the evening star pattern is a simple formation alerting us to the kickoff of a new correction. There are other technical analysis tools that can help increase the strength of the signal generated by this pattern.

As we’ve previously noted, when the pattern appears near resistance, it generates a stronger signal. 

 is the area on the chart where buyers stop buying and sellers start selling. Levels of resistance can be determined in advance of the evening star pattern’s creation.

As a result, if the evening star formation appears near where the level of resistance has formed, there’s a stronger signal that a bear correction is about to begin.

There are multiple types of resistance which can be generated on a chart. One of the easiest to identify is a horizontal level of resistance. Our previous illustrations using Bitcoin and LINK, above, show how powerful the evening star pattern can be when combined with horizontal resistance.

Another easy form of resistance that can be determined on a chart is a moving average.

Above, we have a 4-hour price chart for Bitcoin with a 50-period simple moving average included. As Bitcoin’s price breaks below the moving average, it briefly rallies to reach the underside.

The evening star candlestick pattern appears right at the moving average, signaling a deeper correction is likely to continue. Bitcoin ends up correcting another 7% over the next day.

Evening Star Pattern vs. Other Trend Reversal Patterns

There are several other bearish reversal patterns which crypto traders follow. Let’s look at how the evening star pattern compares to the head and shoulders, bearish harami, and triple top patterns.

 is a popular reversal pattern followed by crypto traders. There are several differences between the head and shoulders pattern and the evening star.

The evening star pattern develops in three candles, while the head and shoulders may take more candles to develop. Actually, it’s impossible for the head and shoulders pattern to develop in fewer than five candles. The head and shoulders pattern actually forms three smaller tops within the larger pattern, and therefore needs more candles to complete the pattern. 

On the other hand, the evening star pattern will take the shape of one rounded top.

As a result, it’s possible for the evening star to be a portion of the head and shoulders pattern, but the head and shoulders pattern cannot be a part of the evening star.

 is another favorite pattern among crypto traders. However, there are distinct differences between it and the evening star.

The biggest difference between these popular candlestick formations is that the evening star forms in three candles, while the harami forms in two.

Additionally, the high point of the evening star pattern is the second candle. On the other hand, the high point of the harami is in the first candle.

Of course, the second candles of both the evening star and bearish harami are small-bodied candles. However, the evening star’s second candle becomes the high point of the pattern, whereas the second candle of the harami gaps lower to form inside the body of the first candle.

There are a few differences between the evening star and triple top patterns.

 takes place in a sideways range. This means that price is trading sideways as each of the three tops is formed. On the other hand, the evening star is created after an uptrend, not in a sideways range.

Secondly, the triple top requires a minimum of five to six candles to create. The evening star pattern is a small three-candle formation.

Finally, the evening star candlestick pattern could be included within the triple top pattern, but never the other way around. The triple top is the larger pattern, and requires three tops to form, whereas the evening star is just one rounded top.

The three candles of the evening star candlestick pattern make it easy to spot and identify on a market chart. The evening star can help traders exit a bullish market or establish new 

 trading opportunities. Sometimes the evening star can generate false signals, but when combined with other forms of technical analysis, such as horizontal resistance, it can reliably be used to signal a new downtrend. 

Evening Star Pattern How  to Identify a Bearish Reversal in Crypto

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Evening Star Pattern: How to Identify a Bearish Reversal in Crypto

Is the crypto sell off slowing down? Look out for bullish reversals by including falling wedge patterns in your trading arsenal.

The falling wedge is a bullish price pattern that represents a story about the market in which bulls are preparing for another push. In cryptocurrency trading, buying an asset from a logical position is more likely to provide success than randomly buying an asset without applying 

. Therefore, keeping falling wedge patterns as a main pattern in your trading checklist is a great way to make money from the crypto market. This article explains the falling wedge pattern’s bullish indication in crypto charts, along with its use as both trend continuation and reversal pattern.

Is a Falling Wedge Pattern Bullish or Bearish?

A falling wedge pattern is bullish, although it appears after a bearish trend. It signifies that bulls have lost their momentum, and bears have temporarily taken control over the price. As a result, the price starts to make new lower lows, but at a corrective pace. 

Crypto prices rarely move in a straight line. Rather, like most assets they tend to zigzag, with swing lows and highs forming, even if the price remains within a trend. Therefore, investors often experience temporary bearish correction within bullish trends, giving rise to patterns like the wedge, triangle, flag or channel. 

These are signs that buying pressures are being reduced due to profit-taking. The uniqueness of the falling wedge pattern is that it can produce a higher accuracy of trade than a traditional descending channel.

Although both the descending channel and falling wedge are bullish reversal patterns, the falling wedge has better accuracy than the descending channel, whose price corrects lower by maintaining an equal distance between swing highs and lows. 

On the other hand, with the falling wedge, swing levels squeeze toward each other, which is a sign of a deeper correction. Before making a trading decision, investors should focus on where the major trend is heading and how volumes are performing.

Let’s look at the pros and cons of the falling wedge pattern:

A price pattern on a cryptocurrency chart isn’t randomly formed. Instead, it represents a story about buyers’ and sellers’ activity. Likewise, the falling wedge pattern, which occurs after a bearish trend, represents a narrative about what bulls and bears are doing — and what they might do next. 

A bullish trend forms after a significant event by encouraging buyers to long an asset with the hope of future price appreciation. However, it’s often difficult for investors to hold this position for a long time. They usually book a profit after getting some benefit, often adding more positions when the price is discounted. As a result, the bearish wedge pattern that we see after a bullish trend is partially the result of buyers’ profit-taking. Once the profit-taking is over and the price finds a dip, investors will begin to buy again. 

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