The Hot Dog Pattern, a Powerful Crypto Price Action you need to learn
In trading, there is a common saying that small trading ranges are followed by big trading ranges. With Bitcoin's price being trapped in a consolidation phase, we're experiencing a lot of market indecisiveness, which has opened the door for new trading opportunities.
Hot Dog Pattern
Hot Dog Pattern The hot dog pattern is a reversal trading pattern made up of 3 consecutive candlesticks that appear to resemble a hot dog.
To recognize the bullish hot dog pattern, we need to look for three simple rules
The middle candlestick has the most extensive trading range out of the three candlesticks.
The middle candlestick is always a bullish candle.
The two outside candles on each side are bearish.
The bearish hot dog pattern looks similar, but the middle candlestick is bearish, and the two outside candles on each side are bullish.
How to Trade with the Hot Dog Pattern
The essential entry criteria for this chart pattern are straightforward.
The trading range developed by the 3-candlestick pattern will often lead to a breakout and a trend reversal. In this regard, to capitalize on the imminent breakout, we place a buy order above the high of the middle candle.
Technically speaking, Bitcoin's price remains at the same price levels it was trading a year ago, which shows that we're in a massive buildup phase that can lead to having the hot dog pattern occurring more often.
Examples of the Hot Dog Pattern?
The hot dog pattern is identified by the three candle formation, which resembles a hot dog.
This trading pattern forms when the price of an asset is in a trading range and forms three separate candlesticks. The middle candlestick must have the largest trading range out of the three.
The hot dog pattern is a reversal trading pattern that often appears at the top of an upward trend and the bottom of a downward trend. This means that if we see a bullish hot dog pattern, we can expect a bullish breakout and vice versa.
Looking forward
In the past, the hot dog pattern has helped us identify a lot of considerable price moves. Furthermore, with Bitcoin's price being trapped in a consolidation phase, we can expect to see more hot dog patterns appearing over the coming days.
