Bitcoin Trend-line Break
After bitcoin price has moved in a certain direction for an extended period of time within a channel it reaches a point where it stops moving within the channel. When this happens we say the btcusd crypto trend line has been broken.
Since the line is point of support/resistance then we expect the btcusd market to go toward the in the opposite market trend direction. When this happens traders will close out the orders that they had bought or sold. This is known as booking profit.
Up Bitcoin trend Reversal
When bitcoin price breaks-out up-wards line (support) the btcusd market will then move down
This signal is considered to be complete with the creation of lower high or lower low. This also provides an opportunity to go short once it's broken.
Down Bitcoin trend Reversal
When bitcoin price breaks out downwards line (resistance) the btcusd market then will move up
Down-ward Channel break
This signal is considered to be complete with creation of a higher low or higher high. This also provides a opportunity to go long once it's broken.
NB: Sometimes when bitcoin price breaks its bitcoin trend it might first consolidate before moving in the opposite market trend direction. Either way it is always good to take profit when the btcusd market direction reverses.
To trade this setup as a trader once you open a new trade position in direction of the bitcoin trend reversal the bitcoin price should immediately head in that particular direction, in a bitcoin cryptocurrency price break out manner. This means that the btcusd market should immediately head in that direction without much of a resistance.
If on the other hand the bitcoin market does not immediately head in direction of the bitcoin price breakout then it is best to close out the trade because it means that the bitcoin trend is still holding.
Another tip is to wait out for the bitcoin trend line to be broken & for the btcusd market to close above or below it to confirm this bitcoin trade signal.
What happens is that most traders place trades waiting for a reversal even before the bitcoin trend is broken, only for the bitcoin price to touch this line and for the prevailing market trend direction to hold and bitcoin to continue with the current market direction.
Hence, when trading this setup it is better to wait until the breakout has been confirmed by bitcoin price closing above/below the bitcoin trend line, based on the direction of the price.
- Upward Market Direction Reversal - this signal is confirmed once the btcusd market closes below this upward line, this should be the right time to open a sell short trade position, so as to avoid a bitcoin trade whipsaw.
- Down-ward Market Direction Reversal - this signal is confirmed once the btcusd market closes above the downward line, this should be the right time to open a buy long trade position, so as to avoid a btcusd crypto currency trade fake out.
Combining with Double Tops or Double Bottoms Bitcoin Patterns
A good trade setup to combine this setup with is the double tops and double bottoms chart patterns. Read Double Top and Double Bottom Chart patterns Tutorial.
This setup should already have formed before the bitcoin trend break signal. Because these double top and double bottom are also reversal setups, then combining these two setups will give the trader good probability of avoiding a bitcoin whipsaw.
In the above chart screenshots these bitcoin setups can be confirmed to have formed even before the reversal bitcoin signal popped up.
First Explanation of Upwards Direction Reversal - the Double tops pattern had already formed before the bitcoin crypto trend break reversal setup appeared on the bitcoin chart.
Second Explanation Examples of Downwards Direction Reversal - the Double bottoms bitcoin pattern had already formed before the bitcoin crypto trend break reversal setup appeared on the btcusd crypto chart.
Double Top or Double Bottoms Combined with other Reversal Signals
Study More Topics and Courses:
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