Diversification reduce reliance on any single market, ensuring stability during downturns. Here are the top 5 ways to diversify your portfolio.

Imagine watching the market crash while your portfolio stays steady — not because you predicted the dip, but because you built a strong defense against it. 

 is a time-tested financial safeguard in unpredictable markets. By balancing various assets, such as crypto, commodities, 

 and international stocks, investors can weather 

 and seize opportunities. So, how do you diversify effectively without overcomplicating things? This article explores the top expert strategies, and some common pitfalls to avoid.

 strategy that spreads investments across different asset classes, sectors or countries to reduce exposure to any single asset or risk. This approach aims to stabilize returns by cushioning the impact of market volatility on your overall portfolio.

Why is portfolio diversification important?

The age-old advice not to “put all your eggs in one basket” holds true when it comes to investing, and it’s a simple but powerful way to protect your wealth. Diversification helps safeguard your capital by spreading your investments across different assets so that when one underperforms, others may help offset the loss. This strategy is especially important for people nearing retirement, or for anyone who values financial stability.

By investing across various asset classes — such as stocks, bonds and real estate, as well as different industries and geographic regions — you build a portfolio that’s more resilient to economic ups and downs. But beyond just reducing risk, diversification often leads to better risk-adjusted returns and less day-to-day volatility, for an investment experience that’s less stressful overall. Moreover, because not all investments will dip at the same time, investors don’t continually have to monitor everything in their portfolios.

Diversification can also help guard against inflation, thanks to assets that tend to perform well when prices rise. At the same time, it opens the door to opportunities in growing markets, all while keeping your investment approach balanced and aligned with your long-term financial goals.

Top 5 tips for diversifying your portfolio

Here are five smart ways to diversify your investments and protect your future returns.

Tip 1: Spread investments across asset classes

Spreading your investments across different asset classes, such as stocks, bonds, real estate, cryptocurrencies and commodities, helps ensure your portfolio isn’t overly exposed to the risks of any single market segment. This makes your investments more resilient. Different assets often react differently to market conditions, so when one asset underperforms, others may perform better, balancing your overall returns (as well as your risks).

Assuming you invest solely in stocks, and the stock market declines, your entire portfolio may suffer. However, if you also hold bonds, which often perform well when stocks decline, any blow to your portfolio can be softened.​

Don’t just buy one type of stock or bond. Within each asset class, invest in a mix of sectors (such as technology, healthcare and energy), company sizes (large-cap, mid-cap and small-cap) and styles (growth, value and dividend). This approach further reduces the risk that poor performance in one area or industry will drag down your entire portfolio.

If you invest heavily in the technology sector and it experiences a downturn, your portfolio could suffer accordingly. Diversifying into other sectors like healthcare or consumer goods can help balance your investments’ performance.​

Tip 3: Low-cost index funds and ETFs for instant diversification

 (ETFs) offer a ready-made way to achieve diversification. They provide exposure to a broad range of assets or sectors, often at a lower cost than actively managed funds. This approach simplifies diversification, and can be more accessible for individual investors, especially beginners. It's an efficient way to diversify quickly and easily, as each fund typically holds dozens or even hundreds of underlying securities.

For instance, investing in an S&P 500 index fund gives you exposure to 500 large US companies, providing instant diversification across various industries.​

​Expanding your portfolio to include international assets can enhance diversification and provide exposure to growth opportunities beyond your home country. Investing globally can help mitigate risks associated with domestic economic downturns, as different regions may experience varying economic cycles.​

 their US counterparts in the first quarter of 2025. This outperformance was attributed to strong corporate earnings, increased defense and infrastructure spending in Europe, and the absence of direct US tariffs targeting European goods. Despite initial skepticism, European stocks rose by 10–12%, even as US markets declined somewhat, thus helping to stabilize global portfolio returns for investors with international diversification

However, investors must be mindful of currency exchange risks. Fluctuations in exchange rates can impact the value of international investments. For instance, if you invest in a European company and the euro depreciates against the US dollar, the value of your investment in dollar terms may decrease even if the company's performance remains strong.

Diversification isn’t a one-time task. Over time, some investments may grow faster than others, skewing your original allocation. Regularly reviewing and rebalancing your portfolio ensures it stays aligned with your 

 and investment goals, maintaining the benefits of diversification while improving long-term performance.

Let’s say your target allocation is 60% stocks and 40% bonds, but stocks perform well and grow to 70% of your portfolio. In this case, rebalancing would involve selling some stocks and buying bonds to return to your original allocation.​

Common portfolio diversification mistakes to avoid

Avoiding these common diversification mistakes can help you build a stronger, more resilient portfolio:

How to diversify your portfolio with Bybit

Bybit is a leading crypto exchange that offers a wide range of products designed to help you diversify across cryptocurrencies, traditional assets and innovative financial instruments. Following are some of the many products and services that Bybit offers.

Portfolio diversification is a key strategy for reducing risk by spreading investments across different asset classes, sectors and regions. Achieving this goal, however, requires a balanced and disciplined approach to ensure resilience and long-term growth. Bybit helps simplify this process with powerful tools like MT5 trading, Copy Trading and Structured Products. These tools allow investors to diversify their portfolios more effectively, providing access to diverse markets and strategies while also minimizing risk. 

Beginner

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Top 5 tips to diversify your portfolio

Obol Collective (OBOL) enhances Ethereum staking with distributed validators, reducing risk, slashing penalties, and entry barriers for smaller stakers.

The Ethereum blockchain has crashed!" — This is a news piece that has never been reported and will, hopefully, never see the light of day. Although several other blockchain networks have experienced significant outages or total breakdowns, a network failure of any appreciable proportions has never occurred in the history of 

 (ETH). A large part of the blockchain's stellar security record is due to its global and well-decentralized network of validator 

However, despite boasting excellent decentralization properties, Ethereum does have areas to improve upon in its validation and 

 mechanisms. First, running a full validator node on the network is financially prohibitive for smaller individuals and entities, as the blockchain requires a stake of 32 ETH (around $84,500 as of May 14, 2025) per each full validator. Secondly, there’s always a risk of individual validators, even the largest ones, being hacked. Finally, technical failures may lead to slashing penalties for validators, and too many instances of such slashing can undermine trust in the blockchain’s security model.

Obol Collective (OBOL) is a decentralized platform based on 

 (DVT), which aims to solve the vulnerabilities of Ethereum validation and staking. Leveraging DVT, Obol lets multiple nodes run as a single validator, splitting both the processing load and slashing risks. By distributing responsibility across numerous participants, Obol effectively eliminates single points of failure and enhances the overall resilience of Ethereum’s staking infrastructure. Importantly, Obol’s use of DVT reduces entry barriers to Ethereum staking for smaller entities — individuals or small organizations — as they can team up and pool their resources to act as a single validator.

 (OBOL), a provider of decentralized infrastructure, enables multiple parties to jointly run Ethereum validators in a secure and fault-tolerant fashion. 

At the core of Obol’s product offering is DVT — a technology that splits all the functionalities of a single validator on a 

 (PoS) network between multiple (potentially many) individual nodes. These nodes share not only processing responsibilities, but also risks and rewards.

Obol’s infrastructure project is most typically used by 

 (RPL), to support their operations. While these protocols handle user funds and front-end functionality, Obol provides its DVT-based validator set to help support their Ethereum-based liquid staking.

Obol offers numerous benefits to liquid staking protocols and validator entities. It creates access to Ethereum staking for smaller, aspiring validators. Such entities often struggle with the financial requirement of staking no fewer than 32 ETH to run a validator. By joining an Obol cluster, which lets multiple nodes act as a single validator, these smaller players can participate in Ethereum staking by splitting the 32 ETH requirement between them.

Additionally, Obol’s DVT-based node splitting for validators provides better protection against the risk of slashing, which results in financial penalties or even suspension for the offending node. Slashing occurs on Ethereum and other PoS chains when a validator fails to fulfill their responsibilities on the network. It may happen due to willful misbehavior, or it could often be the result of honest mistakes or misconfigurations. For instance, a failed internet connection may keep a validator node offline for too long, resulting in slashing. Thanks to Obol's DVT, the other nodes can still keep the cluster functioning if one node fails.

The Obol project was conceptualized and developed by Obol Labs, an Illinois (US)–based company founded in 2021 by Oisín Kyne and Collin Myers, and the platform is supported by the nonprofit Obol Association. The first distributed validator on Ethereum was launched by the project in late 2022. As of this writing in May 2025, Obol Collective has established itself as the largest provider of DVT services in the blockchain industry.

Using Obol, developers and operators can create distributed validator (DV) clusters, each one acting as a single full validator on Ethereum. There are two options for creating clusters within Obol Collective: 

When one operator creates a cluster, they can assign multiple nodes to it, creating a distributed setup that avoids a single point of failure. It's recommended that the cluster nodes be hosted on different machines, although it's also permissible to use a single machine for all of the nodes. Using one machine for all cluster nodes creates a significant vulnerability, due to centralization of resources.

To automate and manage proper splitting of validator rewards and staking allocations, Obol uses a set of 

. These are noncustodial and normally immutable, meaning that the share allocations rewarded to nodes within a DV cannot be changed after the cluster’s deployment. However, one specific type of Splits contract, a 

 splitter contract, does have the functionality to update split percentages at a post-deployment stage. 

Obol Splits technology has been integrated into some of the leading liquid staking and restaking protocols — Lido and 

 (EIGEN) — to help DV operators service these platforms.

Charon is middleware developed by Obol to allow any Ethereum validator to operate as part of a DV. It acts as the main layer, allowing the platform to offer DVT-based services. Using Charon, operators can create a Byzantine fault tolerant (BFT) cluster and coordinate their work on the network as a single entity. Byzantine fault tolerance allows Obol clusters to operate and process Ethereum blocks even if some of the nodes within the cluster behave maliciously, or fail due to technical issues.

Obol also offers a staking-as-a-service (StaaS) product that lets users access staking opportunities without having to run the actual node hardware, further reducing barriers to end users for entry to Ethereum staking.

Obol’s DV Launchpad lets users configure and launch their clusters. Step by step, the launchpad walks users through all of the procedures required to create their own DV together with their peers. For less technically minded users, the launchpad is an ideal way to set up clusters using its graphical interface.

The platform's native token, OBOL, is an 

 asset issued on the Ethereum blockchain. OBOL was launched in January 2025, more than two years after Obol began offering its DV services. Upon launch, OBOL tokens remained locked, i.e., non-transferable. On May 7, 2025, this restriction was removed, making OBOL publicly available and freely tradable. Due to the lockup period, many online sources report May 7 as the token's actual launch date.

The OBOL token has several key functions on Obol Collective. One of these is 

, as OBOL token holders can delegate their voting power to designated delegates who participate in votes in the Token House, a governance platform where proposals regarding Obol Collective's direction and rules are introduced, considered and voted on.

Delegates also vote on funding allocations to support ecosystem growth under Obol’s Retroactive Funding (RAF) program. As such, OBOL holders may participate in funding decisions through their chosen delegates.

Another utility function of the token is that of staking. You can earn OBOL rewards through OBOL Incentives, a community incentives program that lets you stake your ETH on DVs. In 2025, 12.5 million OBOL are being distributed as staking rewards under this program.

The OBOL token may also be used for various DeFi use cases, e.g., within lending protocols and restaking platforms, as well as for increasing liquidity on DeFi protocols by contributing to their liquidity pools.

OBOL's total and maximum supply is 500 million, with just over 98.7 million tokens in circulation. Of the total supply amount, 7.5% was distributed via a retroactive 

 that rewarded certain ecosystem community members, such as developers and users who contributed to testnet and Alpha and Beta Mainnet operations.

The chart below shows the allocation shares of the token’s total supply.

The OBOL token is available on Bybit both as a 

. You can also take advantage of the Bybit event dedicated to the OBOL token to grab a share of the 

To join the event, deposit or trade OBOL on Bybit's Spot market, and stake between 200 and 1,000 OBOL using Bybit’s 15-day Fixed Savings plan to earn a 25% APR. Also, VIP users can enjoy staking limits of 2,000 OBOL and an exclusive 50% APR, while new users can access up to 200% APR via a booster voucher. The event is valid till Jun 7, 2025, 12PM UTC.

As of May 14, 2025, the OBOL token has been on the market only for a week. It’s currently trading at $0.2347, 38.3% lower than its ATH of $0.3801 on May 7, 2025, and 2.1% higher than its ATL of $0.2298, registered on May 13, 2025.

Long-term price forecasts for OBOL are mostly bullish. DigitalCoinPrice 

 of $0.79 in 2027 and $1.17 in 2030, while CoinCodex 

 at around $ 0.25 in 2027 and rise to $0.86 in 2030.

Given the token's minimal market history, future price determination for OBOL is a tentative exercise at the moment. Various market forces and industry developments can influence the token's price in the future, so always conduct your 

 before deciding to invest in OBOL or any other crypto token.

As the leading provider of a decentralized operator ecosystem, Obol stands out as one of the most essential decentralized infrastructure networks in the Ethereum ecosystem, offering a truly next-gen staking and validation system and contributing to better blockchain security. Obol's DVT-based model offers slashing-resistant nodes, and helps further decentralize Ethereum’s validator system.

Distributed validators are crucial not just for decentralization, but also for better performance and security. Unlike traditional validators, they democratize access to Ethereum staking by supporting restaking-based finance applications and smaller players in the niche. Among Layer 1 blockchains, Ethereum features some of the most onerous financial requirements in order to run a full validator node. Obol Collective solves this problem using its DV model, a true innovation within the world of Ethereum.

Advanced

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Obol Collective (OBOL): Coordinating trust through collective staking

This article explores Lorenzo Protocol, how its core technology works, the utility of its native BANK token and how you can trade it on Bybit.

Bitcoin, the world’s most successful original cryptocurrency, holds the largest crypto market capitalization. However, much of its vast liquidity remains separate from the diverse yield opportunities in 

. Lorenzo Protocol is designed to bridge this gap, aiming to transform BTC from a passive store of value into a productive, yield-generating asset for both institutional and retail users.

This article explores Lorenzo Protocol, its recent evolution into an institutional-grade asset management platform, how its core technology works, the utility of its native BANK token and how you can trade it on Bybit.

 is a decentralized asset management platform that’s building an institutional-grade financial layer for Bitcoin, aiming to unlock its vast liquidity for the DeFi ecosystem. Initially focused on helping BTC holders access yield through 

 its infrastructure with the introduction of its Financial Abstraction Layer. This strategic shift positions Lorenzo Protocol as an on-chain asset management platform that’s dedicated to tokenizing financial products and delivering sustainable, real yield.

The protocol's core mission is to advance a borderless global economy by enabling Bitcoin holders and other capital providers to earn yield without sacrificing their assets’ liquidity. It seeks to connect idle capital with diverse yield strategies, including staking and sophisticated trading opportunities, making these opportunities accessible through standardized, tokenized financial products.

Who are Lorenzo Protocol's founders and investors?

Lorenzo Protocol was co-founded by a team with strong backgrounds in finance and technology. Co-founders Matt Ye, Fan Sang and Toby Yu serve (respectively) as CEO, CTO and CFO. Their collective expertise guides the protocol's development and strategic vision.

The project has garnered support from a range of prominent investors. Key backers include YZi Labs, BNB Chain, Geekcartel, NGC Ventures, HTX Ventures, ArkStream Capital, Animoca Brands and Sats Ventures. As of May 12, 2025, Lorenzo Protocol has a DeFi 

Two core components power Lorenzo Protocol’s mission to bring institutional-grade financial products on-chain: the 

The Financial Abstraction Layer is Lorenzo's core infrastructure. It tokenizes centralized finance (CeFi) strategies and makes them usable within DeFi. The FAL packages complex operations, such as custody, lending and trading, into simple, tokenized products accessible via standardized vaults and modular APIs. This allows financial access platforms (like neobanks or PayFi apps) to integrate verifiable yield modules without building complex financial logic themselves. 

An example of a product powered by FAL is the On-Chain Traded Fund (OTF), which tokenizes yield strategies (fixed yield, principal protection, etc.) into a single tradable ticker, similar to traditional 

The Bitcoin Liquidity Layer specifically focuses on integrating BTC into DeFi. Recognizing that a vast amount of Bitcoin sits idle, this layer provides infrastructure for issuing various BTC-native derivative tokens. These include stBTC, a liquid staking token representing Bitcoin staked via 

 (WBTC) standard designed for seamless use across Lorenzo's ecosystem and DeFi. This layer aims to turn passive BTC into active capital for 

BANK is the native governance and utility token of the Lorenzo Protocol. It plays a crucial role in the ecosystem's operation and long-term alignment. The key use cases of BANK include:

As of May 12, 2025, according to CoinGecko data, 

The initial circulating supply was 20.25% of the total, with 8% of the total supply reserved for an initial community 

. BANK’s token unlock schedule is designed for long-term alignment, with no token unlocks for the team, investors, advisors or treasury in the first year post-

Bybit has recently expanded its offerings on its user-friendly and intuitive cryptocurrency exchange by 

. This allows traders to gain exposure to BANK's price movements with leverage.

The BANKUSDT Perpetual contract is featured in Bybit's Innovation Zone, which provides access to new and innovative token pairs. Users can trade this contract with up to 50x leverage.

You can trade the BANKUSDT Perpetual contract on Bybit once you have a verified account with deposited funds. Here's how to get started, in four simple steps:

Intermediate

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Lorenzo Protocol (BANK): Unlocking institutional Bitcoin liquidity and yield

In this article, we’ll dive into the Pundi X ecosystem and learn how each product works, examine the PUNDIX token and share how to trade PUNDIX on Bybit.

Pundi X, founded in 2017 by Zac Cheah and Pitt Huang, is a blockchain-based payment solution designed to simplify cryptocurrency transactions, making them as seamless as traditional retail payments.

With an ecosystem of tools like the XPOS point-of-sale device, XWallet mobile app and XPASS virtual card, Pundi X aims to bridge the gap between the digital and physical.

Pundi X is a blockchain-based payment solution aimed at making cryptocurrency transactions as straightforward as traditional retail payments. Founded in 2017, it bridges the gap between digital assets and retail, enabling consumers to buy, sell and spend crypto in physical stores.

The project initially launched with the NPXS token in 2018, later rebranding to PUNDIX in 2021 via a 1000:1 token swap intended to reduce supply and strengthen its brand identity.

Pundi X was co-founded in 2017 by Zac Cheah and Pitt Huang.

The project is backed by a mix of institutional investors and blockchain pioneers, supporting its mission to make crypto payments mainstream.

The Pundi X ecosystem is designed to make crypto transactions as seamless as traditional payments, bridging the gap between blockchain and retail. 

Pundi X Chain is a multichain blockchain network designed for high-speed, low-cost retail transactions. It’s optimized to support the Pundi X ecosystem, including XPOS, XWallet and XPASS, providing a scalable infrastructure for global merchants looking to integrate blockchain technology.

PUNDIX is the native utility token of the Pundi X ecosystem. It supports transactions, rewards and network security. Initially launched as NPXS in 2018, it rebranded to PUNDIX in 2021 with a 1000:1 token swap.

PUNDIX is available for trading on multiple leading exchanges, including Bybit, which recently listed the PUNDIX/USDT Perpetual contract with up to 25x leverage. This listing provides traders with enhanced flexibility for leveraged trading.

Trading PUNDIX on Bybit is straightforward. Simply use the following step-by-step guide:

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Pundi X (PUNDIX): AI-powered web3 payment ecosystem

Candlestick

Trading

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

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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. 

Candlestick Patterns Professional Traders Use

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

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

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