Steemit Crypto Academy | Homework Task 3 For @stream4u | What is Chart Patterns? | Price Breakout - Continuation Patterns - Reversal Patterns | STOPLOSS.

Hello, everyone. It's my pleasure to be here again to solve a task after attending a lecture from a Steemit crypto professor @stream4u. In this task I will be discussing what chart patterns is all about, price breakouts, continuation pattern, reversal patterns and stop loss. With no further delay, I will dive into the context fully.

What is a Chart Pattern?

Uptrend chart pattern of REEF/USDT asset

The image above is showing the chart pattern for the REEF/USDT asset. Chart pattern simply means the price formation of an asset which includes the history of the price movement of the asset, as available in different time frame. Chart pattern is very important in technical analysis as it is used to make BUY or SELL decisions. A crypto trader needs to understand chart pattern before making the buy or sell decision. And we have the continuation pattern and reversal pattern.

What is a Price Breakout?

Price breakout in cryptocurrency explains a point at which the price movement of a crypto asset tend to move below the support or move above the resistance. This gives birth to the two price breakouts; Resistance breakout and Support breakout. Having known that the support line of an asset is the point at which price goes up, opening a good position for buy and resistance line is the point at which the price of an asset drops which is the best position to sell.

Resistance breakout: A point at the which the price movement of an asset tend to move above the resistance line. The prices at the breakout is indicated below.

Resistance breakout

Support breakout: A point at which the price movement of the coin tend to move below the support line in a chart pattern. The screenshot below has the prices at each level indicated on it.

Support breakout

Lets talk about entry levels;

Entry Level: Entering a trade at a price breakout is risky and tend to be the fastest way to make quick profits in trading. If you must enter a trade in that level, it is important to consider the stoploss measure.

Entry level and Stoploss

Stop Loss: Stop loss is an exit from a trade. A time to make a decision to leave a trade after considering the likelihood fall in price ahead. From the above screenshot (having the prices indicated on it), if you make your entry at the third support you must be ready to exit the trade at the first support and make sure the supports are closer to each other.

What is a Continuation Pattern?

Continuation pattern is the chart pattern that indicates an asset will continue in a particular trend, either uptrend or downtrend. And in this chart pattern, collection of the price or retracements are done quickly within the same trend such that it's hardly revealed that there has been any change of trend at any moment. The identification of continuation pattern on a technical chart can be seen through the Higher High and Lower Low. The screenshots below shows the trend of the assets having the price levels on it.

Continuation pattern (uptrend pattern)

What is a Higher High Formation?

Higher high formation is a continuation pattern where the buyers command an asset price more than the sellers and take the the price of the asset back to the recent high.

The red arrow pointing to the higher high region

What is a Lower Low Formation?

Lower low formation is the continuation pattern whereby seller command price more than the buyers thereby bringing down the price of an asset back to recent low.

Source

Lower low

What is a Reversal Pattern?

The reversal pattern is a chart pattern which implies the end of a trend and the trend takes another direction. Example is an uptrend going back to downtrend.

What is a Double Top Pattern?

Source

Double top pattern

This is used for two high points but at the same level. This happens when an asset experience a reversal pattern and in the process comes back to another high attained by the previous movement, at the same level.

What is a Double Low Pattern?

Source

Double Low pattern

These are two low points that occurred after a reversal pattern thereby bringing the two different price movement to a low at the same level.

In Investing and Trading, what is meant by StopLoss?

Like I mentioned earlier at the beginning of this context, Stoploss is;

StopLoss: Stoploss is an exit from a trade. A time to make a decision to leave a trade after considering the likelihood fall in price ahead. From the above screenshot (having the prices indicated on it), if you make your entry at the third support you must be ready to exit the trade at the first support (first low) and make sure the two lows are closer to each other.

Where to find and how to use Stoploss

Finding the Stoploss using the support

Stoploss are located by drawing a trend line for a initial support level in an asset chart, thereby waiting for the price to come down but at mid way it stopped and the price moved up, draw another trend line as you await another support to be unveiled. When the price comes down again, draw another trend. Making three lows altogether.

Now to use the Stoploss, use the third low to buy the asset and make the first low to be your stoploss point.

NOTE: Be sure that the first low and third low are close to each other. There will be great trading throughput with this.

In Conclusion

I've been able to understand differences between the types of chart patterns and how they reveal the history of price movement of an asset and its application to making technical analysis. Technical analysis is best used to make decisions to when to buy and sell an asset, noting that it's not always 100% accurate but guarantees accuracy of buy or sell decision to an extent. I am now equipped with technical analysis that can help me to make decisions as to when to buy and sell an asset.

Thanks to the Steemit crypto professor @stream4u for his lectures and I look forward to learning more from the professor and other crypto professors of the @cryptoacademy. Thank you all for reading.

Special regards;
Cc: @steemcurator01
Cc: @steemcurator02
Cc: @steemitblog
Cc: @stream4u

Written by; @fredquantum