Each crypto chart patterns has its own meaning and can provide entry and exit signals based on price action. However, you can combine several of them to maximize your potential and create an effective strategy. In this article, we will discuss how combining chart patterns can help you make informed decisions and increase your chances of success.
Why combine trading patterns?
Correctly interpreting trading chart patterns can help you gain valuable information about price action at a given moment. However, by combining multiple patterns, you can have a more comprehensive picture of the market situation and gain advantages such as:
- Increased signal accuracy
You can obtain more precise and reliable signals because the confluence of multiple patterns can provide additional confirmation of the market direction.
- Risk reduction
By using multiple patterns to confirm a signal, you can minimize the possibility of entering a trade based on a false signal or an incomplete pattern.
- Diversification of strategies
Combining different trading patterns allows you to diversify your strategies and adapt to different market conditions. This is especially useful in volatile or constantly changing markets, where it is crucial to be flexible and quickly adapt to new trends.
Combination Strategies for Trading Patterns
There are several strategies for combining trading patterns. Here are some of the most commonly used and effective ones:
Pattern Confirmation
This strategy involves waiting for two or more patterns to form and confirm before making a decision. For example, if a bullish reversal pattern is identified along with a bullish breakout pattern, the confirmation of both patterns can be a signal to enter a bullish trade.
Pattern Confluence
Pattern confluence occurs when different patterns signal the same market direction. For example, if a bullish reversal pattern coincides with a bullish continuation pattern, this indicates a strong buying signal.
Complementary Patterns
Some patterns can be complementary and provide additional information when combined. For example, a double-top pattern followed by a bearish divergence pattern indicates a strong selling signal.
Confirmation Patterns and Stop Loss
In this strategy, traders use a confirmation pattern along with a Stop Loss to manage risk. For example, if a bullish reversal pattern is identified, you can wait for a confirmation pattern to form before entering the trade. Also, set a Stop Loss below the reversal point to limit losses in case the trade doesn't unfold as expected.
Patterns with Technical Indicators
Trading patterns can also be combined with technical indicators to obtain stronger signals. For example, a bullish reversal pattern along with an upward-moving average crossover can provide a more reliable buy signal. In our blog, we provide a detailed guide on how to combine crypto chart patterns with other technical indicators.
How to Develop Your Own Pattern Combination Strategy
Before we wrap up, we want to share some tips to consider when developing your own pattern combination strategies.
- Identify patterns that best suit your trading style as well as the market conditions.
- Study and understand how these patterns work and how they can be effectively combined.
- Practice identifying and applying these patterns in a simulated trading environment or a demo account.
- Adjust and refine your strategy as you gain experience and knowledge.
Remember that developing an effective pattern combination strategy takes time, practice, and patience. Not all pattern combinations will work in every market situation, so it's important to be prepared to adjust and adapt your strategy as needed.
Additionally, don't forget to track your trades and analyze the results to identify areas for improvement. With dedication and perseverance, you can develop a solid pattern combination strategy and increase your chances of success in scalping. Good luck
