Hello everyone. I welcome you all in the second week of steemit crypto academy. This week, the professor @imagen has taught us about " Trading with Double Top and Wedges ". I have read the lecture and understand the main concept. Now i am going to do my homework task.

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Question 1.

^{Explain in your own words the concept of Double Top, Double Bottom and Wedges. How to interpret each one?}

Double Top

The Double top is a chart pattern which is also known as the double roof pattern. This pattern is formed on the top of the bullish trend. This is a bearish trend reversal. The trend reverse from bullish to bearish after formation of the Double Top. The double top mean that two highs are formed on the peak of the bullish trend. When price reach to these peaks, these peaks serve as resistance and price cannot move further in upward direction after meeting this resistance and start moving downward.

The resistance level stop price to rise more. At first, the price is in uptrend forming the higher highs where each high is higher than previous high. The price continue to rise up. This indicate that the buyers are in control which are pushing he market upward direction. The buying pressure is greater than selling pressure. Because of high demand and low supply, coin continue to move in upward direction.

Then the first peak of the double Top chart pattern is formed which serve as resistance and price cannot exceed more to this resistance level. The sellers enter into the market and push the price downward. After a small retracement, The buyers again take control of the market. The buyers again push the price upward direction and price again start moving in upward direction. Price again rise up and form another higher high. But they fail to form the high higher than previous high. The price again face an obstacle known as resistance at the same level. This is second peak of the Double Top pattern.

After the second peak formation, price again start falling down. The seller enter into the market and start pushing market downward direction. This is the best selling point. The best point to make a sell entry is when the price break the neckline while moving downward and then retest. The seller should sell their assets to safe from risk and to earn profit.

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Double Bottom

The Double bottom is a chart pattern which is also known as the double roof pattern. This pattern is formed at the extreme bottom of the down trend. This is a bullish trend reversal. The trend reverse from bearish to bullish after formation of the Double bottom. The double bottom mean that two lows are formed at the extreme bottom of the down trend. When price reach to these bottom, these bottom serve as support level and price cannot decline further in downward direction after meeting this support and start moving upward.

The support level stop price to decline more. At first, the price is in downtrend forming the lower low where each low is lower than previous low. The price continue to decline. This indicate that the sellers are in control which are pushing the market downward direction. The selling pressure is greater than buying pressure. Because of high supply and low demand, coin continue to move in downward direction.

Then the first bottom of the double bottom chart pattern is formed which serve as support and price cannot decline more to this support level. The buyers enter into the market and push the price upward. After a small retracement, The sellers again take control of the market. The sellers again push the price downward direction and price again start moving in downward direction. Price again start declining and form another low. But they fail to form the low lower than previous low. The price again face an obstacle known as support at the same level. This is second bottom of the Double bottom pattern.

After the second bottom formation, price again start rising up. The buyer enter into the market and start pushing market upward direction. This is the best buying point. The best point to make a buy entry is when the price break the neckline while moving upward and then retest. The buyers should buy the coin to earn profit.

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Wedge

The wedge is another chart pattern. This is also a trend reversal chart pattern which is form in the trending markets. At the end of the wedge chart pattern, price is expected to reverse into opposite direction. The two trendlines are use to form the wedge pattern which converge and continue to move in the same direction either upward or downward till they converge.

There are two types of wedge

Rising Wedge

Falling wedge

Rising wedge

The rising wedge is form in the bullish trend. This wedge is form when the coin is rising upward direction. The two trend line are use to form the rising wedge. The two line converge and continue to move yet they meet and the trend get reverse.

When the rising wedge form, the trend is expected to reverse into bearish trend at the end. The two trendline converge in the upward direction. They move in the upward direction with movement of the price. This indicate that the buyers are in control. The demand is high as compare to the supply and price is rising up. The price continue to rise up while forming the higher high where each high is higher than previous high. The trendline also converge to upward direction.

AT the end of the wedge pattern, the sellers enter into the market and take control. The price start declining downward direction. They push the market downward side. The price face some pullbacks while moving downward direction. After breakout occurrence, and bullish trend reverse into bearish trend and price continue to move in bearish trend.

Screenshot (8447).png

Falling wedge

The falling wedge is form in the bearish trend. This wedge is form when the coin is declining downward direction. The two trend line are use to form the falling wedge. The two line converge and continue to move yet they meet and the trend get reverse from bearish to bullish.

When the falling wedge form, the trend is expected to reverse into bullish trend at the end. The two trendline converge in the downward direction. They move in the downward direction with movement of the price. This indicate that the sellers are in control. The demand is low as compare to the supply and price is declining up. The price continue to decline while forming the lower low where each low is lower than previous low. The trendline also converge to downward direction.

AT the end of the wedge pattern, the buyers enter into the market and take control. The price start rising upward direction. They push the market in upward side. The price face some pullbacks while moving upward direction. After breakout occurrence, and bearish trend reverse into bullish trend and price continue to move in upward direction.

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Question 2

^{Main differences between the Double Top and the Double Bottom. Show screenshots}

Differences between the Double Top and the Double Bottom

	Double Top	Double Bottom
1	The double top is formed at the top of the uptrend	The double bottom is formed at the bottom of the downtrend
2	Double top is the bearish reversal. It use the two trendline converge and move in the upward direction. AT the end of the double top, the trend reverse from bullish to bearish.	Double bottom is the bullish reversal. It use the two trendline converge and move in the downward direction. At the end of the double bottom, the trend reverse from bearish to bullish.
3	At the end of the double top, the sell opportunity is created for the sellers because trend get reverse from the bullish to bearish trend.	At the end of the double bottom, the buy opportunity is created for the buyers. because trend get reverse from bearish to bullish trend.
4	The formation of the double top form the W	The formation of the double bottom form the M.

Screenshot (8430).png ^{Double top}

Screenshot (8431).png

^{Double bottom}

Question 3

^{Explain and highlight the main differences between a bullish wedge and a bearish wedge. Show screenshots of each}

	Bullish Wedge	Bearish Wedge
1	The rising wedge is the bearish trend reversal. When the bullish wedge is form at the top of the bullish trend, the trend reverse from the bullish to bearish.	The falling wedge is the bullish trend reversal. When the bearish wedge is form at the bottom of the bearish trend, the trend reverse from the bearish to bullish
2	The two trendlines are use to form the bullish trendline. These line converge in the upward direction by connecting the higher high and higher lows.	The two trendlines are use to form the bearish trendline. These lines converge in the downward direction by connecting the lower low and lower high.
3	The traders should exit from the market at the end of the bullish wedge.	The traders should enter into the market at the end of the bearish wedge.
4	It is also known as rising wedge because it rise from down to top.	It is also known as the falling wedge because it fall from top to down.

Screenshot (8439).png ^{Rising wedge}

Screenshot (8437).png ^{falling wedge}

Question 4.

^{Explain the volatility that usually exists with respect to the volume in the wedges. When is there usually more volume? What happens if a pullback breaks the support of a wedge?}

When the wedge are formed in the chart, the volatility of the asset's price is reduce. The volatility with which the price change is reduce when the wedge is formed on any asset's chart. The wedge is a pause in the asset's price, that's why the market volume decrease to the great extent. The formation of the wedge, either its falling wedge or rising wedge, is the result of pause in the market price. Because of this, the market volume reduce. There are two type of the wedge; rising wedge and falling wedge.

The wedge which if formed after the end of the bullish season is known as the falling wedge. The price decrease and move from top to down. There are two trendlines converging downward. In the formation of falling wedge, the volume and volatility in the price decrease. Whereas, during the rising wedge(which is formed after a downtrend), the price move from down to top. This is formed with the two convergence trendlines which formed from down to top with movement of price. During this wedge, the volatility and volume, both reduce.

Let have a look on the below chart. To understand what happen to the volume in the market during the formation of the wedge, we have added the volume indicator. The wedge which we have in the below screen short is the falling wedge. The market price is decreasing. The two trendline converge from top to down. If we look at the volume indicator, the candlestick are shrinking and this show that the volume is decreasing. During the wedge formation, the short candlesticks are formed which indicate the volume is reducing.

But when the wedge get finish, there is great volatility and the volume also got increased to the great extent. We can see from the below screen short that, After the breakout of the falling wedge, the volatility got high and volume increased.

Screenshot (8436).png

What happens if a pullback breaks the support of a wedge?

There are two type of the wedge which we have studied in the above section which are the falling wedge and rising wedge. So the breakout of support level by the pull back can also be negative and positive. This all depend upon the type of the wedge. We should consider the breakout of the support level by the pull back to confirm the validation of the wedge pattern.

When there is the falling wedge and trendlines are converging downward direction, the coin is decreasing. The lower low and low highs are formed where the lower lows touch the support level and lower high touch the resistance level. There should be breakout of the wedge through the breakout of resistance level by a pull back. This will show that the falling wedge is valid. After the breakout of the resistance level, the trend will continue in upward direction. There will be the bullish trend after breakout of the rising wedge and price will move from down to top. If the pull back break the support level, this will show that the falling wedge was not the valid.

Screenshot (8436).png ^{Breakout of the falling wedge}

When there is the rising wedge and trendlines are converging upward direction, the coin is increasing. The higher high and high lows are formed where the high lows touch the support level and higher high touch the resistance level. There should be breakout of the wedge through the breakout of support level by a pull back. This will show that the rising wedge is valid. After the breakout of the support level, the trend will continue in downward direction. There will be the bearish trend after breakout of the rising wedge and price will move from top to down.

Screenshot (8434)_LI.jpg ^{Breakout of the rising wedge}

Question 5.

^{Find and analyze the double top pattern on at least 2 charts. Show your own screenshots.}

The below is the screen short where the price was rising in upward direction. The price was moving from down to top while forming the higher high and high lows. Each high was higher than previous high and in this way, the coin continue to rise upward direction. Then the coin reach to a point where a new high(1) is formed which is higher than previous high. Then the sellers enter into the market and push the price downward. After a pull back, the buyers again enter into the market and push the market in upward direction. A new higher high(2) was created but this time, the coin fail to form a high higher than the previous high.

The two tops formed the double top pattern. At the high 2, the buyers could not push the price in upward direction more than the previous high. Then the sellers enter into the market and they push the price downward direction. The price formed a low which was lower than the top 2 low. The low of the top 2 was broken, then there was retest of the broken low and after that and price continue to move in downward direction.

Screenshot (8433).png

The below is the screen short where the price was rising in upward direction. The price was moving from down to top while forming the higher high and high lows. Each high was higher than previous high and in this way, the coin continue to rise upward direction. Then the coin reach to a point where a new high(1) is formed which is higher than previous high. Then the sellers enter into the market and push the price downward. After a pull back, the buyers again enter into the market and push the market in upward direction. A new higher high(2) was created but this time, the coin fail to form a high higher than the previous high.

The two tops formed the double top pattern. At the high 2, the buyers could not push the price in upward direction more than the previous high. Then the sellers enter into the market and they push the price downward direction. The price formed a low which was lower than the top 2 low. The low of the top 2 was broken, then there was retest of the broken low and after that and price continue to move in downward direction.
Screenshot (8430).png

Question6.

^{Find and analyze at least 2 rising wedges and 2 falling wedges on at least 2 charts. Show your own screenshots.}

1- Falling Wedge

The below is the chart where the price initially was rising upward. The coin was rising upward while forming the higher high where each newly created high was higher than the previous high. Then a point occurred when the price took a pause. Then the falling wedge was formed. The price started moving downward direction. The price started moving from top to down. After the breakout of the resistance at the end of the falling wedge, the price again started moving upward direction by continuing the uptrend.

Screenshot (8436)_LI.jpg

2- Falling Wedge

The below is the chart where the price initially was rising upward. The coin was rising upward while forming the higher high where each newly created high was higher than the previous high. Then a point occurred when the price took a pause. Then the falling wedge was formed. The price started moving downward direction. The price started moving from top to down. After the breakout of the resistance at the end of the falling wedge, the price again started moving upward direction by continuing the uptrend.

Screenshot (8437).png

1-Rising Wedge

The below is the chart where the price initially was declining downward. The coin was falling downward while forming the lower low where each low was lower than the previous low. Then a point occurred when the price took a pause. Then the rising wedge was formed. The price started moving upward direction after formation of the rising wedge. The two trendline converge upward direction. The price started moving from down to top. After the breakout of the support at the end of the rising wedge, the price again started moving downward direction by continuing the downtrend.

Screenshot (8438).png

2-Rising Wedge

The below is the chart where the price initially was declining downward. The coin was falling downward while forming the lower low where each low was lower than the previous low. Then a point occurred when the price took a pause. Then the rising wedge was formed. The price started moving upward direction after formation of the rising wedge. The two trendline converge upward direction. The price started moving from down to top. After the breakout of the support at the end of the rising wedge, the price again started moving downward direction by continuing the downtrend.

Screenshot (8439).png

Question 7.

^{Importance of patterns in technical trading.}

Market structure

The traders use the patterns in technical analysis to get to know about the market structure. The patterns helps the traders to analyze the market and get the information about the market.

Predict the market future

The traders can predict the market future by using the different patterns in technical analysis. There are a lot of the patterns which when applied appropriately helps the traders to predict where the market will move next and then they can make best trading decisions.

Find out best entry and exit spots

The patterns are applied to find out the best entry and exit spots. There are a lot of pattern which helps the traders to find out the best spot to enter into the market and exit from the market. By using these points, the traders can earn huge profit.

Risk Management

The patterns helps the traders to manage the risk involved in the trading. The traders can set the stop lose and take profit effectively using the patterns in the crypto trading.

Analysis of Trend, trend reversal

The traders can use the patterns to analyze the market trend and trend reversal. The trend is very important factor to know to perform the trading successfully. The traders should have proper information about the market trend before making any trading decision. The patterns helps the traders to confirm the market trend and also get the trend reversal price points.

Identification of Resistance and Support Level

The patterns are very helpful in the crypto world to identify the support and resistance levels. The traders can use patterns along with other technical tools to get the best support and resistance area and then can use this information to trade successfully.

Analysis of the trader's behavior

The traders can use the patterns to analyze the market. The traders can get to know about the emotions and the trading system of other traders using the patterns. They can analyze the behavior of other traders in the market. The patterns are very helpful in analyzing the traders emotions and behavior. They can then take the best trading decisions.

Question 8.

^{Do you find it effective to use these patterns in trading? Justify your answer.}

Yes!. I have find the patterns very helpful and useful in my trading journey. The patterns help me alot to analyze the market effectively and efficiently. I have found some patterns greatly beneficial and double top and double bottom are also among them. When these patterns are appeared on the chart, the traders can then trade successfully using these patterns. But we cannot ignore the risk factor too. Though these patterns are very good and helpful but they do not always work as expected. When they are formed in trading the coins, they do not always react according to the traders expectation and may mislead them because of which, the traders may have big lose of money.

But this not happen always. Sometime, they work effectively according to the expectation because of which, the traders earn alot. But we should not rely on a single pattern while performing the market analysis. We should consider multiple chart patterns before taking and trading decision. A single chart pattern may produce the wrong signal and information. But when we combined the chart pattern with other chart patterns, tools or indicators, the produced results are more reliable and useful. We can confirm the signals but combing the chart patterns with other chart patterns and then can trade successfully.

Conclusion

Chart patterns are very useful to trade successfully in the crypto world. The chart patterns help to analyze the market efficiently. The traders can spot the trend reversal points, can confirm the market trend easily using the chart patterns. In this lecture, we have studied about the double top, bottom and wedge chart patterns. The double top and the double bottom are the trend reversal patterns which are formed at the end of the market trend. The double top is formed at the top of the uptrend and after formation of this chart pattern, the market start moving downward.

The double top is formed at the bottom of the downtrend and after formation of this chart pattern, the market start moving upward. The wedge chart patterns are very helpful and helps the traders to take the best trading decisions. But we should not rely on a single chart pattern. We should use the chart pattern by combining them with other patterns to get the more accurate and reliable signals.

@imagen

^{Note: All the images are taken by me from the tradingview.com. The rest are created by me through the powerpoint.}