Lumia (LUMIA) revolutionizes RWA tokenization with DeFi liquidity, MEV protection, and zk-rollup technology.

Real-world assets (RWAs) are quickly becoming a leading topic within the blockchain ecosystem, with many protocols and chains starting to offer asset tokenization services. However, many of these solutions are based on simply moving a variety of physical and digital assets to a 

 environment without regard for how these tokenized on-chain products will be further utilized. As a result, after companies tokenize their assets on-chain, they realize that the lack of liquidity is hampering the assets' further circulation and adoption.

 project that has taken a much more comprehensive approach to asset tokenization. The platform allows businesses to tokenize various RWAs, including a diverse range of commodities, and provides ways to boost their liquidity and applications within the 

 (DeFi) realm. Based on Polygon's modular 

 (Polygon CDK), Lumia provides a robust, secure, compliant, cost-effective and scalable infrastructure to put RWAs to active use within the world of web3.

Having started its operations under the name of 

 (ORN) as an Ethereum (ETH)-–based app that aggregated liquidity from various 

 (DEX) exchanges, the project rebranded to Lumia in 2023 and expanded its functionality to focus on the RWA niche. As of late 2024, Lumia remains one of the pioneers of liquidity-enhanced RWA use on blockchain.

 (LUMIA) is a Layer 2 blockchain designed for tokenization and use of RWAs in DeFi applications. 

The platform allows businesses to bring a variety of physical and digital assets 

, securely tokenize them and further use the assets for collateral provision, lending and other crypto finance use cases.

The Lumia platform's origins date back to 2020, when Orion Protocol (ORN) was launched on Ethereum. Co-founded by Alexey Koloskov and Kal Ali, Orion offered liquidity aggregation from multiple CEX and DEX platforms. In late 2023, Orion announced its rebranding to Lumia, focusing more specifically on RWAs and their active use through enhanced liquidity provision.

The project also transitioned from Ethereum to its own Layer 2 chain in October 2024, with ORN tokens to be migrated to the new platform's native token, LUMIA, at a 1:1 ratio. As of December 2024, the major crypto exchange platforms have migrated ORN to LUMIA or are in the process of migrating it.

 (ZKP)–based rollup network built using thePolygon CDK, a versatile, open-source blockchain development framework provided by the 

 project. The Lumia platform is highly modular, with different components used for its execution, data availability (DA) and settlement layers.

Chain Abstraction and Account Abstraction

 to offer chain abstraction (CA), and with thirdweb to offer account abstraction (AA) services. Lumia's CA service is designed to provide DeFi users with a single-chain experience by accessing liquidity and opportunities across multiple blockchain networks. Meanwhile, AA allows users to transact across multiple platforms on a single, user-friendly interface. By leveraging 

–based addresses instead of the standard externally-owned account (EOA) addresses, users can seamlessly transact across platforms using a single wallet tied to these smart contracts.

By providing a unified, user-friendly interface, Lumia's AA lets Web 2.0 users enter the world of web3-based DeFi with a minimal learning curve involved. AA’s additional benefits include enhanced security at the smart contract level and gasless, Lumia-sponsored transactions.

Lumia users can also take advantage of intent-based trading, meaning they specify their transaction intents, and orders only execute if a matching deal is found across the entire ecosystem accessible to Lumia. Special liquidity nodes process intent-based orders and offer the best rates they can source for the user’s intent. This helps ensure that Lumia users get the best possible deals.

This advanced trading mechanism is powered by 

, which introduces various unique advantages to enhance the user experience. For instance, it provides robust security against 

 (MEV) attacks, one of the most common exploits in the world of DeFi. It also optimizes price efficiency and minimizes the negative price impact of trades by leveraging its Resolvers to source liquidity across the entire DeFi market.

Built using the Polygon CDK, Lumia is a ZK–based rollup running on a 

 processing engine. Based on a highly modular design, the Polygon CDK allows rollups to easily incorporate different execution, DA and settlement layers and other associated technologies. Lumia, for instance, integrates various execution engines, such as the privacy-focused Privado ID and Miden. Privado ID allows Lumia to securely and privately identify users. Based on zk technology, Privado ID enables individuals and businesses to control their personal data by sharing only the required identity information to DApps without revealing any private or financially sensitive details.

In turn, Miden is also a ZK–based platform that offers private accounts and transaction execution. Operating as a rollup network, Miden is a highly scalable environment for DeFi operators and users who value data confidentiality, an essential consideration for any finance-focused platform.

 with other blockchain environments, achieved by leveraging two modular interoperability layers: AggLayer and Hyperlane.

AggLayer is Lumia's primary interoperability layer. Built into the Polygon CDK, AggLayer offers cross-chain transaction capacity across various Polygon-based Layer 2 rollup networks. It unifies liquidity across the entire ecosystem of AggLayer-connected chains, allowing Lumia to provide deep liquidity for tokenized assets.

Hyperlane, the other interoperability protocol used by Lumia, is a solution designed to help developers easily and efficiently send arbitrary data across chains. It expands Lumia's reach beyond Polygon's ecosystem. Theoretically, it may allow Lumia to access resources and liquidity across the entire ecosystem of chains that have adopted Hyperlane. As of late 2024, there are dozens of such Hyperlane-powered blockchains outside of the Polygon environment.

Lumia provides a streamlined process for RWA tokenization. As the first step, the asset owner needs to provide proof of ownership documentation and undergo any other required due diligence procedures. Following that, a Bailment Agreement is signed between the asset owner and the Lumia Foundation, the legal entity behind the project.

Within the contexts of blockchain technology and RWAs, Bailment Agreements are utilized to entrust physical assets to an authorized custodian, while the actual tokenized representations of these assets are held and used within the blockchain space.

After the parties sign a Bailment Agreement, the asset is appraised by third-party valuators and then tokenized on-chain. The tokenized version of the asset can now be used in DeFi applications accessible via Lumia for typical crypto finance operations, e.g., collateral provision, lending, borrowing, staking, yield management and more.

 protocol, sources liquidity from multiple exchange platforms. (This is the core service from which Lumia started its operations when it was known as Orion Protocol.) It accesses liquidity across the crypto market to provide Lumia-based RWAs with much more than tokenized on-chain representation. Besides access to liquidity, Lumia Stream features MEV protection for all trades conducted on the platform, and 

, which allow tokenized assets to be bridged across blockchain platforms.

Using Lumia Stream, developers can also implement virtual 

, which show optimal trading paths between multiple exchanges. These virtual order books can also transform pricing information from the structure used in 

 (AMM) pools to a format compatible with the standard order book model.

Lumia has several specialized node types, including DNLP (Delta Neutral Liquidity Provisioning) nodes and DAC (Data Availability Committee) nodes. The former are designed for decentralized liquidity provision on the network, while the latter play a key role in data validation.

There are also HyperNodes that can be used either to provide the licenses for the operation rights of virtual Lumia machines or supply the licenses used to delegate to DNLP and DAC node operators. HyperNodes can choose to run a DNLP or DAC node or delegate to these node types and earn ecosystem rewards. 

Lumia first made HyperNode licenses available for purchase in July 2024. The license releases and the associated rollout of HyperNodes will be gradual.

The platform uses a network of zkProvers that are responsible for the generation of validity proofs — cryptographic stamps that certify the validity of transaction blocks. Currently, Lumia utilizes the default zkProver infrastructure provided by the Polygon CDK. However, the project has plans to introduce a custom prover layer in partnership with 

, a provider of low-cost and highly scalable ZK validation services. Per the project's documentation, there will be further announcements on integrating a Gevolut-based zkProver system in Q1 2025.

Lumia's early 2025 plans also include creating a decentralized sequencer network (DCN). Sequencers are critical parts of any rollup system. These nodes organize transactions into blocks for further validation. A typical rollup network uses only one sequencer, an issue often cited as one of the key vulnerabilities of rollups.

Lumia aims to introduce a decentralized network of multiple sequencer nodes tailored to the Lumia platform to optimize its security and performance. The project plans to provide incentives in the form of LUMIA tokens to sequencer service providers in order to build its DCN.

We’ve already mentioned some of the specialized node types on Lumia — DNLP, DAC and HyperNodes. Another crucial node variety on the platform is DA (lightclient) nodes. They play a pivotal role in decentralized data availability by ensuring transaction data is securely stored and easily accessible across the Lumia network. Transaction data on Lumia is distributed and stored across the network of DA nodes to provide validators with easy retrieval when data is required.

Data on the DA node network is stored in a secure, cryptographically protected format. Both the encryption and the distributed storage mode ensure confidentiality and high security for Lumia's transaction data.

DA nodes are incentivized with LUMIA tokens, based on their contributions to the network. Node operators are encouraged to actively participate, as the rewards are determined by both the amount of data processing they handle and their network uptime.

The platform's native cryptocurrency, LUMIA, is used for a wide variety of functions:

The LUMIA token was launched in mid-October 2024, replacing the earlier ORN token, the platform's native crypto. ORN was introduced in July 2020, along with the launch of Orion Protocol. As mentioned above, the platform has announced the migration of ORN to LUMIA at a rate of 1:1. As of December 2024, ORN tokens are still in circulation, but are expected to eventually be migrated to LUMIA completely.

LUMIA is a supply-capped token, with a total and maximum supply of 238,888,888.

 as a Perpetual contract based on USDT. Under the terms of the contract, you can trade LUMIA with up to 12.5x leverage.

Bybit's Innovation Zone offers perpetual trading users access to promising new higher-risk/higher-potential cryptocurrencies selected by the platform's professional team.

As of Dec 19, 2024, the LUMIA token is trading at $1.61, or 36.2% lower than its ATH of $2.49 on Dec 4, 2024, and 72.8% higher than its ATL of $0.9205 on Nov 4, 2024.

Long-term price forecasts for LUMIA are bullish. DigitalCoinPrice 

 at $4.19 in 2025 and $12.06 in 2030, while CoinCodex 

 that the token will trade at $7.50 in 2025 and fall slightly to $6.53 in 2030.

Lumia isn't your ordinary RWA-based blockchain project. While countless new platforms help users tokenize physical world assets, very few offer viable ways of further using the tokenized crypto assets within the DeFi ecosystem. Recognizing the gap, the Lumia project team has decisively taken on the task of making RWAs a highly liquid and actively used form of cryptocurrency.

The project also features a solid infrastructural backbone, supported by the Polygon CDK and its high architectural modularity. Using technologies like Miden, Privado ID, AggLayer and Hyperlane adds to the security and interoperability of the Lumia platform. At the same time, Lumia isn't done yet with sculpting its architecture into a piece of blockchain art — in 2025, the project plans to implement a decentralized sequencer network and partner with Gevolut to provide an efficient zkProver layer.

As Lumia builds up its architecture, tokenizing and 

 will undoubtedly become even more efficient, convenient and secure — and decisively more DeFi-esque.

Advanced

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Lumia (LUMIA): Bridging RWA & DeFi for a New Financial Era

SynFutures is a decentralized platform that lets users list on-chain perpetual futures for any crypto and trade them. Learn about SynFutures and how to trade F on Bybit.

SynFutures is a decentralized marketplace that lets users list on-chain perpetual futures for any cryptocurrency and trade them on the platform. In addition to the wide range of supported assets (such as 

, or RWAs, and NFTs), the project's Oyster 

 (AMM) solution enhances liquidity through the combination of an AMM model and an 

. Powered by the native F token, SynFutures is backed by prominent investors and features a cumulative trading volume of over $230 billion.

In this article, we’ll explore SynFutures, its key features and the mechanics behind the Oyster AMM, as well as the F token and its tokenomics.

 is a decentralized derivatives platform that enables users to trade on-chain 

. Powered by a single-token liquidity model, SynFutures allows free listing of any digital asset on its protocol without any 

 (DAO) proposals or centralized intervention. Doing so fosters on-chain trading of a diverse range of cryptocurrency perpetuals via the platform.

To maximize liquidity, SynFutures employs the Oyster automated market maker

 that provides a customizable set of tools, such as concentrated liquidity and 

. In addition to crypto, the project also enables users to trade perpetual contracts based on 

 platform. As the native coin of the SynFutures ecosystem, the F token is utilized primarily for community governance and 

 boosts, as well as for fee discounts and rewards.

At the time of this writing (Dec 19, 2024), SynFutures boasts a cumulative trading volume of

 and 308,900 total users, of which 22,410 were active within the past seven days. In addition to featuring a 

 (TVL) of over $50 million, the decentralized derivatives platform has processed 15.24 million transactions to date.

SynFutures was founded in 2020 by Rachel Lin and Matthew Liu.Before serving as the CEO and co-founder of the decentralized futures platform, Lin worked at Deutsche Bank, specializing in derivatives. She also co-founded Matrixport, one of Asia's largest digital asset neobanks.

Starting his career as a trader managing Deutsche Bank's Asia rates desk, Matthew Liu's MBA at Northwestern eventually led to him joining the blockchain space. While at Ant Group, he was instrumental in setting up the company's global treasury and later took charge of its financial blockchain business, with a focus on secondary market trading and credit tokenization.

To date, SynFutures has raised $37.4 million in funding from investors in one seed and two early-stage financing rounds. Some of the most notable contributors include Bybit, Pantera Capital, Polychain Capital, Dragonfly Capital, HashKey Capital and Standard Crypto, among others.

SynFutures' ecosystem consists of three flagship solutions:

SynFutures' Oyster AMM: How Does it Work?

One of the most unique components of SynFutures' ecosystem is the 

. It combines the functionality of order books and AMMs to offer users the following key features:

SynFutures' F token serves as the native coin within the project's ecosystem. The main utilities of the digital asset include the following:

F's max supply is capped at 10 billion tokens. Currently, 1.2 billion F are circulating in the market. As of Dec 16, 2024, the native coin 

 a nearly $86.5 million market cap, a fully diluted valuation (FDV) of $720 million and a trading volume of $28.52 million over the past 24 hours. F’s allocation is per the graphic below:

SynFutures’ decentralized derivatives platform enables users to list and trade any digital asset and combine it with other cryptocurrencies to create combinations of perpetual futures pairs. Powered by the F native token and the Oyster AMM, SynFutures fosters enhanced liquidity and user experience and a permissionless listing process for perpetuals.

's user-friendly and intuitive Spot trading platform. 

Intermediate

SynFutures.png

SynFutures (F): Exploring the Decentralized Derivatives Platform

Learn about Hypurr Fun, a unique Telegram trading bot and launchpad for Hyperliquid, a high-performance decentralized trading platform and layer 1.

Hyperliquid is a high-performance decentralized trading blockchain that has recently gained a lot of attention. It offers a comprehensive suite of trading features, including perpetual contracts with leverage of up to 50x on major cryptocurrencies like BTC and ETH. Additionally, the upcoming 

 launch is set to further grow the Hyperliquid ecosystem, providing Ethereum-compatible smart contracts to developers.

 is a high-performance Layer 1 blockchain built specifically for decentralized derivatives trading. It combines the best features of 

 (DeFi) with centralized finance (CeFi) user experience. 

Unlike traditional decentralized rivals that often struggle with 

 issues, Hyperliquid delivers a fast, low-slippage trading environment designed to cater to both professional traders and crypto enthusiasts.

By leveraging the HyperBFT algorithm, Hyperliquid can process over 100,000 TPS with minimal latency. This ensures that trades are executed almost instantaneously, providing a seamless trading experience comparable to that of major centralized exchanges (CEXs).

 is the native token of the Hyperliquid blockchain. It powers the ecosystem and provides unique benefits to its holders. HYPE thus serves as the backbone of the platform, enabling trading fee discounts, staking opportunities and governance rights. The token also incorporates a 

 mechanism to maintain price stability, aligning the platform’s growth with token value appreciation.

On Nov 29, 2024, Hyperliquid conducted one of the largest and most generous airdrops in crypto history. The genesis airdrop distributed 31% of the total HYPE supply to over 90,000 early adopters and users of the platform. This airdrop not only rewarded loyal community members, but also set a new standard for fairness and inclusivity.

Token distribution of HYPE is as follows:

Hyperliquid uses an unique and competitive auction mechanism to set the price for newly listed tokens on spot exchanges. Auctions occur every 31 hours, starting at double the price of the last transaction.

The listing auction is a process designed to limit new token listings to just 282 per year. Each auction starts at a high price and decreases linearly until a buyer emerges. This scarcity-driven model has made Hyperliquid’s auctions highly coveted, with prices steadily climbing as teams rush to secure their spot.

Recent auctions highlight this trend: SOVRN paid $262,000 to secure a listing, while MON, rumored to be tied to the Pixelmon team, purchased theirs for nearly double at almost $488,000. Tomorrow’s auction for GOD is expected to start at roughly $1 million, showcasing the parabolic rise in listing costs.

The constantly increasing scarcity of listings underscores the value of securing exposure on Hyperliquid's high-performance trading platform.

 is a unique Telegram trading bot that makes launching and trading meme coins on Hyperliquid effortless. With just a few clicks, users can participate in token launches, track their performance and compete with other traders in exclusive 

 chats. It’s primarily designed for speed, simplicity and security. Hypurr Fun brings the full power of Hyperliquid’s meme coin ecosystem directly to your fingertips.

 offers all the tools a user needs to snipe new launches, manage portfolios and maximize efficiency. 

Users can configure slippage, entry sizes and exit percentages to tailor their trading experience. The bot is always on, ensuring you never miss an opportunity, while its responsive interface and robust security measures provide a seamless, safe experience.

Whether you’re a seasoned trader or new to the game, Hypurr Fun ensures you stay ahead in the competitive meme coin market.

Hypurr Fun has quickly become a launchpad for some of the most exciting projects in the Hyperliquid ecosystem. Among the top launches is HYENA, a fierce predator-themed token with a current market cap of $6.1M. HYENA has gained significant traction as a key player on Hyperliquid, boasting a strong trust factor and consistent progress toward full deployment.

Another standout is BEATS, an AI-driven music creation platform with a $1.52M market cap. BEATS leverages autonomous AI technology to revolutionize music production, showcasing the innovative potential of Hypurr Fun–launched tokens. Lastly, HYRO, the liquid hero, has made its mark with a $865.97K market cap, offering unique creative value to the ecosystem. These 

 the diversity and dynamism of Hypurr Fun’s capabilities and potential.

The HFUN token has emerged as a standout in the Hyperliquid ecosystem. At the time of this writing (Dec 18, 2024), it has a market cap of $230M and a fully diluted valuation of the same amount. HFUN demonstrates Hypurr Fun’s strength: the token has achieved a 285% price increase in the past seven days, far outpacing both the broader crypto market and similar Telegram bot-based projects.

A unique feature of HFUN is its fee-to-buyback mechanism, whereby 100% of fees from trades are used to purchase HFUN tokens, creating consistent upward price pressure. 

Despite its origins as a test for the Hypurr Fun Telegram bot, HFUN has captured the attention of traders, reaching an all-time high of $300.19 on Dec 17, 2024. This growth reflects both the community's enthusiasm for the token and its role in the thriving ecosystem of Hyperliquid.

The Hyperliquid ecosystem is on fire, with its innovative features and exclusive platforms such as Hypurr Fun driving unparalleled momentum. From top launches like HYENA and BEATS to the exceptional performance of HFUN, it’s clear that Hyperliquid is becoming the go-to destination for meme coin enthusiasts and serious traders alike. 

As listing auctions heat up and trading tools evolve, the opportunities within Hyperliquid are only set to grow.

hypurr fun.png

Hypurr Fun: Hyperliquid's Premier Launchpad and Trading Bot

Sonic Labs has launched its Sonic mainnet, an EVM-compatible Layer-1 blockchain evolved from Fantom, offering 10,000 TPS and sub-second finality.

The S&P 500 fell 2.95% after the Fed cut rates but reduced 2025 cut projections, raising inflation and growth forecasts, which drove up Treasury yields. Coindesk Indices, an index measuring broader cryptocurrency market performance was down by 2.71%, with Bitcoin and Ether dropping by 5.71% and 6.00%, respectively in the past 24 hours.

Today's top performer is USUAL, which surged 38.21% following the partnership announcement between Usual, Ethena, and BUIDL to enhance liquidity, yield, and composability in DeFi.

Usual (USUAL), launched in December 2024, is a multi-chain platform offering USD0, a decentralized stablecoin backed by real-world assets, redistributing financial power to the community. Usual, Ethena, and BUIDL (tokenized by Securitize) have 

 to enhance DeFi by integrating liquidity, yield, and composability. The collaboration allows USDtb and BUIDL as collateral for Usual’s USD0 stablecoin, offering maximized yields and seamless swaps between USD0, USDtb, and sUSDe. Ethena strengthens the initiative with delta-neutral strategies and treasury support, bridging TradFi and DeFi for improved liquidity and profitability.

Check Out the Latest Prices, Charts, and Data of 

, an EVM-compatible Layer-1 blockchain evolved from Fantom, offering 10,000 TPS and sub-second finality. The platform introduces a "Fee Monetization" model that shares up to 90% of network fees with developers. FTM token holders can upgrade to the new S token on a one-to-one basis through a dedicated portal, with free swaps available for the first 90 days. The platform features a decentralized Sonic Gateway for secure Ethereum bridging, with plans for multi-chain expansion. Sonic Labs is distributing 190.5 million S tokens through an airdrop program targeting both users and developers, aiming to drive adoption and innovation on the platform.

Yesterday, BTC Spot ETFs experienced total outflows of $84.3 million, including $35.9 million from GBTC and $48.4 million from non-GBTC funds.

Farm Frens and Everseed, developed by Amihan Entertainment, will 

 their token and airdrop on Ethereum layer-2 network Base in January 2025. Players of Farm Frens and Everseed NFT holders will qualify for the airdrop. The studio plans to unite the games further, blending crypto and AI to create next-gen interactive experiences.

Beginner

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Ethena Labs Forms Partnership with World Liberty Financial to Integrate sUSDe Token and Enhance Liquidity

Candlestick

Trading

The head and shoulders patterns can help traders to predict a bullish-to-bearish trend reversal critically. But how does it work? Here's how.

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Understanding the head and shoulders chart pattern may seem very convoluted at the beginning. Still, it helps novice and even advanced traders understand the market and speculate based on logic. Most traders seek from this chart pattern the defined areas that allow anyone to set risk levels and take profits specifically.

But, are they reliable to spot trend reversals? Here’s what you must understand and learn how to apply them to predict a 

What Is the Head and Shoulders Chart Pattern?

The head and shoulders chart pattern refers to a bearish reversal formation on the candlestick chart to help traders identify a reversal coming after a trend has ended.

While the bullish setup incurred that it is an inverse head and shoulders. In a chart formation, they usually appear as a baseline with three-peaks. This pattern usually shows up at the end of an uptrend and signals its reversal. 

You may wonder how this pattern got its name. Well, it’s not because of the famous shampoo brand – the pattern actually resembles 

 (left and right shoulders). Basically, it represents a baseline with three tops, in which the middle top is higher than the other two, which should be ideally positioned on the same line. That baseline is called the neckline, and it is responsible for triggering the bearish signal. So, if the price breaks below it, we’re free to go short.

The head and shoulders formation is one of the most popular chart patterns along with other variants like double tops and bottoms and triangles, among others. Traders regard this formation as one of the most reliable patterns that provide very strong signals. Still, if you combine it with some technical analysis indicator, especially an oscillator showing the overbought level, the pattern will become even more relevant.

Identifying the Head and Shoulders Pattern

It’s very important to identify the head and shoulders pattern correctly. Otherwise, you may end up trading against the general trend. As you already know, the pattern has the following elements:

It’s important to understand that the neckline might not always be a straight line. In fact, most often, it will be tilted in one direction or another. But typically, if the slope is down, it produces a more reliable signal.

The Components of the Head and Shoulders Pattern

The Head and Shoulders pattern has several elements that make it unique and distinguishable on the chart. Understanding its components is crucial because you don’t want to confuse it with other chart formations. Basically, it can be deciphered when 

 exists when the two lowest points of the two troughs are connected.

Still, here’s what you should pay attention to:

The first thing you should consider is the prior trend, which typically should be bullish. Usually, the longer the uptrend lasts, the higher probability of a significant reversal that can be exploited by bears. The uptrend leading to the head and shoulders pattern shows signs of weakness, as the bulls cannot sustain it anymore.

After facing some resistance, the uptrend forms a high and then pulls back for a while. After finding some support, it bounces back to the potentially continued uptrend. So this is how the left shoulder is formed, though we can’t figure it out in real-time. It may look like the price action is forming a double top, for example.

During the rebound following the left shoulder, the price breaks the previous high but faces another resistance. Despite the temporary rally, bulls cannot make it, and the price is pulling back for a second time, leaving the higher high behind. That is when the head of the head and shoulders pattern is formed.

However, the second pullback ends at relatively the same level where the first support showed up – this is the neckline that starts to shape. At this point, we have the left shoulder and the head of the pattern.

As mentioned above, the second pullback finds strong support near the neckline region, and then the price has a final shot to continue the uptrend. However, after facing resistance at the same level where the first high was formed, bulls give up, and the price is retreating for the third time. This longer process suggests that the bullish move is exhausted.

The third high represents the right shoulder. Ideally, the left and right shoulders should be relatively the same level, but the pattern will still be relevant even if there is a slight deviation.

We have already defined the neckline, but this is when it becomes crucial as it separates bulls from bears. In other words, if the price is breaking below this support line, then we can open a short position with a high degree of confidence.

What Is the Inverse Head and Shoulders Pattern?

The head and shoulders can also form in the opposite direction. The inverse head and shoulders follow a bearish move and signals that the market is about to reverse.

As the name suggests, it is the same pattern formation but only upside down. Thus, you should be interested in opening long positions when spotting this pattern on the chart.

During the inverse head and shoulders formation, the first thing you can see is a valley, which is the first low of the pattern. After a relatively long-term downtrend, the price is finding support and bounces back for a while. Eventually, it faces local resistance, and bears try to push prices lower, managing to break below the first low for a while. 

The second valley is lower and represents the head of the inverse pattern. After the head, the price bounces back for a second time but cannot break above the neckline, which at this time acts as resistance. That is when the market forms the third low, which is the second shoulder.

Finally, bulls manage to break the resistance after a third attempt, which is when cryptocurrency traders go long. The price target is calculated similarly; you should measure the distance between the neckline and the lowest low and then add the result to the breakout price to get the price target you aim for.

Characteristics of the Head and Shoulders Pattern

The head and shoulders pattern has several key characteristics that you should pay attention to. The indicator should come on top of an uptrend, so defining the prior trend is essential. For this, you can use a simple Moving Average (MA).

If the uptrend is confirmed and you spot the formation of the head and shoulders pattern, here are some more aspects you should consider:

As the pattern unfolds, you should check the volume indicator, which is usually below the chart. You can also plot other volume indicators on the chart. All in all, you should be interested in a specific behavior of the volume, which will increase the relevance of the head and shoulders pattern. Ideally, volume during the formation of the left shoulder should be higher than during the advance of the pattern’s head. Thus, the decline in volume and the head’s new high suggests that the uptrend is weakening.

Next, the volume should ideally spike when the price forms the right shoulder and is about to break below the neckline. If the volume surges during the breakout, you can rest assured that the trend has reversed for good.

After breaking below the neckline, cryptocurrency traders would go short. The price target of the sell order derives from the distance between the neckline and the top of the head. Thus, after measuring the distance, you can subtract it from the breakout price to reach an approximate price target.

However, the target can also be impacted by several other factors, including previous support levels before the pattern, long-term moving averages, or the Fibonacci retracement levels.  

Head and Shoulders is a bearish pattern that appears during the exhaustion of an uptrend. Thus, it would help if you treated it exclusively as a signal to go short. There is also the inverse head and shoulders pattern. In the case of the latter, traders will get a bullish signal.

The great thing about the head and shoulders pattern is that it can be used on different timeframes. However, it works best for 

, and it can also be of great help for day traders. Fast-paced strategies like scalping don’t work well with this pattern. All in all, it makes sense to check the head and shoulders if you use timeframes larger than M15.

How to Crypto Trade With the Head and Shoulders Pattern? 

The great thing about the head and shoulders pattern is that it can be used with any asset type. That said, it makes sense to use it when trading cryptocurrencies because they are highly volatile and require some well-defined tools to help you read the market and smooth out volatility noise. 

, you should let the head and shoulder pattern unfold and complete itself. If the pattern is still in the middle of the process, don’t try to make assumptions on the neckline’s potential breakout and don’t open any position earlier than that. The market can change its direction in the blink of an eye, leaving you with an open position in the wrong direction. 

Instead, the first thing you should do is to 

. Meanwhile, you can plan your trade ahead of time and be ready to act when the price breaks the neckline.

You should also check the other factors that may make you consider 

. For example, you should start by looking at the previous support levels, which can become your price target for the sell order.

Conservative traders can sometimes stay patient when the neckline is broken and wait for prices to retrace above the neckline level or close to it. However, there is a risk of missing out on the trading opportunity while waiting for a retracement. So, the general consensus recommendation is to 

open a position right after the candle’s close that breaks below the neckline

. Still, you should be aware of the false break risk as well. 

What most intriguing about this pattern is the ease of setting the take profit and stop-loss orders. To manage the risk,

, which is the pattern’s head. In the case of the inverse pattern, you should place the stop loss right below the lower low. As for the take profit target, we have explained in detail how to calculate it.

Benefits of the Head and Shoulders Pattern 

Here is why you should at least try trading the head and shoulders pattern:

The Limitations of the Head and Shoulders Pattern

Head and Shoulders Pattern: What Is It & How to Trade With It?

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