^{This article does not contain investment advice or recommendations. Every investment and trading move involves risk, so you should conduct your own research when making a decision.}

“ F&*K, I bought the Dip and the Dip, Dip Lower !!! “

In buying decisions, Fear of Missing out or FOMO as it is so commonly called in the trading sphere, can cause many an impatient trader to buy in “ Too High”. They then check their portfolio daily only to watch their investments slide in value day after day.

It can be a very discouraging experience. Trust me I have been there.

Therefore, this article serve as a great example or perhaps a good negative example for how not to interpret reversal candles and patterns.

Reversal candles such as Hammers and Dojis are best utilized at the bottom or top of a trend to signify a potential change in trend. See article for TRON (TRX) Technical Analysis for details..
These candles occurring during sideways action tend not to be effective as trend change signals and is best followed by a confirmation candle.

Today we will look at how a pattern consisting of a series of reversal candles play out during a downtrend with ADEX (ADX) and Dragon Chain (DRGN).

And before you ask, Yes! this was a real life charting mistake that I have made earlier on in my investment journey. I made the mistake but that doesn’t mean you have to.

Adex (ADX) Day Chart

The down trend was followed by a dead cat bounce off the support line. For the next four days, price action moved sideways forming four different reversal candles . namely; inverted hammer, a long legged Doji, Hammer, Doji and Grave Doji.

While these candles occurring at the top or bottom of a trend could indicate a trend reversal, sideways action do not instill the same meaning. Sure enough, the pattern of sideways indecision broke and the down trend ensued.

Fortunately, I was able to get out of my entry position at a 2% profit when the price spiked above the support line. Still it is not a comfortable position to be in.

Now all the wiser..

Lets observe another case where this pattern played out.

Dragon Chain (DRGN) Day Chart

During this period of correction, I was contemplating to add Dragon Chain (DRGN) to my portfolio as the price was approaching the support line around 0.00009858 BTC ( 9858 Satoshis ). After falling below the support line, the first reversal candle candle appeared ( Hammer). This could signify the start of a reversal to the upside and I was tempted to enter a position here. However, after learning my lesson from that ADEX (ADX) experience. I decided to wait for confirmation before taking a trade.

Sure enough, the subsequent candle did not serve as confirmation. Neither did it open nor close above the previous candle. Instead it formed another hammer followed by 2 more days of indecision, cumulating into 2 seperate Dojis. Thus, a period of indecision was formed similar to our previous ADEX (ADX) example.

As history served as a predictor for future patterns. I did not add a position here and sure enough the price broke down and there was a down trend continuation.

Sure enough, the subsequent candle did not serve as confirmation. Neither did it open nor close above the previous candle.

Instead it formed another hammer followed by 2 more days of indecision, cumulating into 2 seperate Dojis. Thus, a period of indecision was formed similar to our previous ADEX (ADX) example.

So What Can We Take From All This ?

Besides the importance of using data and past patterns to assit us in making entry and exit points. Knowledge and direction can help eleviate much of the fear associated with the high uncertainty and volitity that is the crypto market.

By setting educated assumptions based on statistics and going through with them, one can take the role of a captain, navigating a ship through the unknown using charts and compass. While it is not the end all and be all, it does forces us to be more rationale in decision making.

This is Millennial Invest.