How to Trade the V-Shaped Bottom?
As the name suggests, V-shaped bottoms resemble a V-shaped price formation that forms when the price turns from an aggressive selling to an aggressive buying mode. This chart pattern calls for a trend reversal, but it can be hard to identify the V-bottom pattern in real-time due to the high volatility involved.
How to Trade V-Bottoms?
First, to have a trend reversal, we need to have a prevailing trend. In the case of a V-shaped bottom, the overall trend is bearish. One of the critical features of a V-bottom is the sharp angle of decline from that very strong bearish trend.
The second phase of the V-bottom is once the sellers capitulate and the buyers step in aggressively. This can be viewed on the price chart by the straight line price action to the upside that is more or less symmetrical to the first part of the pattern.
The reversal pattern is confirmed once the sharp decline has been completely reversed.
Buying and Exit
Buying can be done after a break and close above the neckline, which represents the starting point of the initial sharp decline. The exit point is typically equal to the distance measured from the bottom to the neckline high and projects the same price distance to the upside.
Alternatively, higher risk takers can be more aggressive and try to enter the market once the price has started moving to the upside.
Another essential thing to consider is whether the V-bottom is triggered by a news event. If there is a news catalyst behind the V-bottom pattern, the higher the probability that the cryptocurrency has marked a bottom.
Four tips when trading with the V-shaped bottom
When trading with the v-shaped bottom, it's important to keep a few things in mind.
First, you need to be patient and wait for the right opportunity.
Second, you need to have a clear idea of where you want to get out before you enter the trade.
Third, don't be afraid to take some profits off the table when the trade starts to move in your favor.
And finally, don't forget to use stop losses to protect your profits.
Looking forward in the current bear market
Many investors are wondering how to trade the current bear market. The V-shaped bottom is a classic bear market pattern that typically happens after a major sell-off. The first thing to look for is a sharp V-shaped bottom with a quick bounce back up. This is followed by a period of consolidation where the market stabilizes. After this, the market typically resumes its downtrend.