Understanding Cryptographic Patterns: A Guide to Mapping and Analysis

In recent years, cryptocurrency has become one of the most popular asset classes to trade and invest in. Like any other financial market, cryptocurrency is subject to patterns and trends. These crypto patterns can be analyzed to gain insights into future price movements. Understanding crypto patterns is an important aspect of technical analysis. By doing so, traders and investors can make informed decisions about buying and selling cryptocurrencies. Therefore, it is useful to understand technical analysis and have a general idea of ​​the market’s behavior.

This guide will explore the basics of crypto chart patterns, what they are and list some that every trader should know.

## What are cryptography patterns?

Crypto chart patterns are simply trends and formations observed on cryptocurrency price charts. Traders and investors can use these patterns to identify potential price movements. By noticing them, traders can make informed decisions about their next move, which ultimately helps them decide when to buy or sell the asset in question.

Bullish patterns indicate that the price is about to see an upswing, in which case traders tend to buy. If a crypto pattern is bearish and the price looks like it is going to drop, traders tend to sell their assets and profit before the price drops.

There are many different types of cryptopatterns. Each of them has its own characteristics and implications for price behavior. By performing technical analysis, traders are able to analyze the market based on the price action over a certain period of time. [Technical analysis](/learn/cryptocurrency-technical-analysis-201) should not be confused with fundamental analysis. This is another type of analysis that deals with market sentiment. In other words, it attempts to predict traders’ and investors’ behavior based on current events. While technical analysis deals with market signals and price data, [fundamental analysis](/learn/crypto-fundamental-analysis-101) attempts to predict responses triggered by feelings.

## What are the most common cryptopatterns found on cards?

Over time, various patterns can appear on a chart. Learning what they look like and how to spot them allows traders to make better informed trading decisions. Some of the most common patterns in crypto mapping include the following:

### Cup and handles

Our first trading chart pattern is called the Cup and Handles pattern. This is a bullish signal, typically indicating that the price is trending upwards. The pattern is named after the shape it takes, resembling a cup with a handle.


It starts with forming a cup, or a “U” shape. The shape usually appears in periods of consolidation within the market. Once the cup has formed, the price tends to form a handle. As you can see from the image above, the price of the asset must fall to form the handle. However, this is only a temporary drop. Once the handle is completed, the price typically rises and continues the previous uptrend.

### Wedges

Next we have crypto patterns called wedges. There can be two types of wedges – rising wedges and falling wedges.

[Rising wedges](/learning/rising-wedge-pattern-directory) are usually bearish signals. They are typically formed by two converging trend lines that slope upward. The upper trend line’s slope is steeper than the lower one. This should not be confused with an ascending triangle, even though they look similar. The difference is that the lines are slanted in the same direction.

On the other hand, we have falling wedges. This bullish chart pattern is formed when two converging trend lines slope downward. This time the lower trendline has a steeper slope. This pattern is referred to as a bullish reversal pattern. It is similar to a descending triangle, except that the top and bottom lines are slanted in the same direction.


### Head and Shoulders Pattern

Move into one of the most popular trading patterns, the head and shoulders. This is one of the most reliable trend reversal patterns in all of technical analysis. It has been observed in the crypto industry for years and is quite reliable in predicting price movements.

The pattern is very easy to recognize as it has three peaks. The middle one is the tallest of the three, forming a “head”. Meanwhile, the two lower peaks form the two shoulders. This bearish pattern shows that the market is in a downtrend and that the price may continue to fall.

It is worth noting that the three peaks should have relatively the same height. The middle one is slightly higher than the other two, but the “shoulder” peaks should be much the same height. The closer it is to symmetry, the more perfect the pattern. Once traders manage to identify the pattern, they can start using it to make their predictions.

### Ascending and descending triangle

Ascending and descending triangles are two more common patterns we see developing within the crypto market.


The ascending triangle is a bullish reversal pattern. It is formed by a horizontal resistance line and a rising trend line. The two lines converge to form an upward pointing triangle. The pattern appears when an asset’s price repeatedly tests its horizontal resistance but fails to break it. This indicates that the buying pressure is increasing, and the market may see a breakout.

The opposite situation forms a descending triangle. This time, a horizontal support line and a descending trend line converge to form a downward pointing triangle. This time, the price repeatedly tests a horizontal support line, and just like before, it cannot break the trend. The crypto pattern is confirmed when the price breaks below the support line. This is a bearish signal, meaning investors should expect prices to start falling in the near future.

### Double and Triple Top pattern

Next we have a double and triple trading chart pattern.

The double top pattern is another bearish reversal pattern. This happens when a crypto price reaches a new high, drops slightly, and then proceeds to retest the highs it just set. However, this second surge is typically unable to breach the previous high and the price begins to decline. This indicates that the bulls could not push the price up the second time.


Then we have a triple crypto pattern, which is similar except for the fact that it has three tops. This pattern behaves the same, except for the fact that it rises and falls three times before finally breaking support. Again, this is another bearish pattern. This suggests that the bulls have run out of steam, and that downward price action is on the horizon.


### Double bottom

Finally, we have a double bottom pattern. This one is considered a bullish pattern created by two consecutive troughs, roughly equal in price. However, the two are separated by a peak that appears between them.


What happens is that the price of an asset hits a low, then rises to make a high. After that, it falls back to the original low. The double bottom pattern indicates that the selling pressure has been exhausted. As such, the buying pressure is increasing, and a breakout to the upside is expected.

## Charts are crucial for crypto traders

Understanding crypto patterns is an essential skill for anyone who wants to [trade cryptocurrencies](/markets/prices). Although there is no guarantee that patterns will repeat themselves, technical analysis can still help traders understand the market. This will give them an idea of ​​what to expect and enable them to make better informed decisions. If the market is disrupted and stops following the pattern, traders must react and adjust. But knowing how to read cards and notice patterns will at least give them a place to start.

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## Frequently asked questions

### Are there patterns in cryptocurrency?

Yes, cryptocurrency cards are filled with various crypto patterns. They can indicate positive and negative emerging market behavior depending on the pattern.

### What is a 3 top crypto pattern?

The 3-top crypto pattern, also called Triple Top Pattern, is a bearish reversal pattern. It is similar to a double top, only it has 3 tops instead of 2. It happens when a price reaches a resistance 3 times before finally breaking its support.

### Do trading patterns apply to crypto?

Yes, trading patterns can apply to crypto, similar to how they apply to traditional financial markets. In fact, they are necessary for creating technical analysis – one of the basic tools used by crypto traders.

### How do you read cryptopatterns?

Reading crypto patterns involves analyzing price charts and identifying trends and patterns. This is done through the use of technical analysis.