No matter how good the pattern is looking, how bullish you think it is, without confirmation it is not suggested to give it a try.
Before going deeper into what is confirmation, let us show you an example of the trade opportunity you would consider taking.
Identifying chart pattern is not that hard.
After you identify 10 of them, it will become routine to you; you will spot them without using any tool.
That’s the biggest trap you will fall into.
Yeah, even if that looks clear to you, draw the lines, draw the areas.
When you have them on your chart, you can monitor the price action and wait for confirmation.
The first part of confirmation is close above the neckline (resistance).
Then, it is time to wait for a pullback to test that neckline from above.
If that reclaims that area and turn from resistance to support, you have trade opportunity.
Also, the Doji could be considered as a confirmation.
You don’t want to be too much in the market without a stop loss because then the whole account is in danger.
When you are looking for a trade, the first thing you need is to spot a pattern.
Once you spot the double top chart pattern, you are looking for confirmation.
As we mentioned in the previous lesson, it means close above the neckline and second part of the confirmation is a bullish sign on the retest of the broken neckline.
Here is an example of a double bottom chart pattern.
Not only that it has great lied out bottoms in the same area, but it has a perfect retest of the broken neckline (resistance).
Afterward a very good upside momentum that would reach the beginning of the decline that traders likes to use as one of the targets.
The fact that the second swing low didn’t fully test the lowest part of the first swing low is a very good sign for potential upside momentum.
Overall, a nice example of a double bottom chart pattern that offered an amazing entry point and that’s the best part of this pattern.
After entry, the price went up, reaching the area of a target.
On the photo above we have an example of a potential double bottom pattern that failed.
The weakness on the resistance was very clear and we printed bearish pin bar and later on bearish engulfing.
These two were more than enough to keep you away from entering a long position or buying a coin.
This is a clear example of why trading without confirmation is more like gambling than trading.
Milos is an independent trader, with a background in journalism and publishing. Nomadic by nature, he’s lived in four different countries this decade. He’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives. Milos got into Bitcoin while completing his degree and hasn’t looked back since, writing about anything crypto-related. He is the co-founder of the Cryptoaims and he has a strong passion to educate people about this revolutionary technology.