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Bitcoin Trend-line Break - Trading Trend Line Bitcoin Reversal Signals on Bitcoin Charts

After the price of Bitcoin has moved in a certain direction for an extended time period within a channel it reaches to a point where it stops moving within this channel. When this occurs we say the trend line has been broken.

Since the trend line is the point of support or resistance then we expect the market to head towards the in the opposite trend direction after a trend line break. This is because the support/resistance level that the price has been moving along now has been broken. When this happens traders will close their open orders that they had bought or sold. This is known as profit taking.

Uptrend Reversal - Upwards Trend-Line Break

When price breaks an up-wards trend line (support area) the market will then start to move down or start to consolidate at this technical level before heading down.

Trend Line Break Bitcoin Reversal - Trading Bitcoin Trendline Reversal Signals on Bitcoin Charts

Upward Trendline Break

This reversal signal is considered to be confirmed with the formation of a lower high or a lower low - double tops chart pattern. This also provides a trading opportunity for traders who want to sell Bitcoin - to go short once the upward trendline is broken.

Downtrend Reversal - Downward Trendline Break

When price breaks the downward trend line (resistance level) market will then move up or start to consolidate at this technical level before heading up.

BTCUSD Trend Line Break - How Do You Trade Bitcoin Trendline Reversal Signal on Bitcoin Chart?

Downward Trend Line Break

This reversal signal is considered to be confirmed with the formation of a higher low or higher high - double bottoms chart pattern. This also provides a trading opportunity for traders wanting to buy to go long once the downward trend line is broken.

NB: Sometimes when the price breaks its trend line it might first of all consolidate before moving in the opposite market direction. Either way it's always good to take profit when the market direction reverses or when the trend line breaks-out.

To trade this trend-line reversal setup - as a trader once you open a new trade position in direction of the trend reversal the price should move immediately in that direction, in a price breakout manner. This means that the market should soon head in that direction without a lot of resistance.

If on the other hand the market does not immediately head in direction of the price breakout then it is best to close out the trade because it means the trend is still holding and current market direction might continue or at best a price consolidation pattern may form.

Another tip is to wait out for the trend line to be broken and for the market to close above/below it so as to confirm this signal.

What happens is most traders open trade positions waiting for reversal even before the trend is broken, only for the price to touch this trend-line and for the prevailing market trend direction to hold and the Bitcoin prices to continue moving in the current market direction.

Hence, when trading this trend-line break reversal setup it's best to wait until the breakout has been confirmed by price closing above/below the trendline, depending on the direction of the price.

  • Upwards Market Direction Reversal - this signal gets to be confirmed once the market closes below this upwards trendline, this should be the right time to open a sell short trade, so as to avoid a fake out.
  • Downwards Market Direction Reversal - this signal gets to be confirmed once the market closes above the downward trendline, this should be the right time to open a buy long trade position, so as to avoid a whipsaw fakeout.

Combining Together Reversal Signals with Double Tops or Double Bottoms Chart Patterns

A good trade setup to combine this trend-line reversal signal with is the double tops and double bottom chart patterns.

This double tops and double bottoms reversal pattern formation should already have formed before the trend line break signal. Because these double top and double bottoms are also trend reversal setups, then combining these two setups will give Bitcoin traders a good probability of avoiding whipsaws.

In the above chart examples these double tops and double bottoms chart pattern formations can be confirmed to have formed even before the trend line reversal signal appeared.

First Example of Upward Trend Reversal - the Double tops chart pattern had already formed before trend break signal formed on the Bitcoin price chart - this can be illustrated by the lower high just before the upwards trend line break.

Second Example of Downwards Trend Reversal - the Double bottoms chart pattern had already formed before trend break signal formed on the BTC USD ==22==CryptoCryptoCurrency chart - this can be illustrated by the higher low just before the downward trend line break.

Trend Line Break in Crypto - Trading Trend Line Bitcoin Reversal Signal on Bitcoin Charts

Double Tops or Double Bottoms Combined with other Trendline Reversal Signals

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