Don’t Be Fooled By This Crypto Fakeout Chart Pattern
When looking at a crypto chart it is always easy to tell where you should have bought and sold in the past. However, in the present moment we can never know how high price will still go in the future. Also the price swings within market cycles aren’t predictable.
Often new traders have a prejudice when watching a chart, based on price movements they’ve already seen before, they are prone to expect the same movements again and behave accordingly in their trades.
Especially fakeout patterns can be dangerous for newbies with a prejudice regarding the chart.
Dangerous Crypto Fakeout Pattern
If you are just starting to trade it will be helpful for you to know about this certain fakeout pattern so you can avoid to buy highs that might look promising in advance.
The fakeout pattern we’re talking about looks the following:
Fakeout Example 1:
Imagine you see this pattern, thinking that the broken resistance is a bullish signal and you buy right above. The blue rectangle might be the area where you would have bought:
However price shifts right away and crashes..:
Fakeout Example 2:
Again at this point you think this might get even higher…
..but again it crashes:
Fakeout Example 3:
Same thing again.. Price looks like starting into a larger up wave:
..but crashes. Damn fakeout! 🙂
The scenario can be described the following:
Recently there has been a top or even an all time high after which price has retraced a bit. But then the price tuns back upwards and passes the previous top or all time high. Since price has just passed the old top you might think that it is about to start into an even bigger up wave.
However, after having climbed only a little further up than the old top – price suddenly turns and starts to descend below the previous top, then crashes further down.
This pattern is tricky because sometimes it happens to crypto charts that they climb further up, forming new higher up waves one after each other. That is why traders often have the bias in their mind that price will go way further up once it has broken the previous high.
It’s important to keep in mind that it often won’t and that you’d feel pretty fooled when buying those highs.