On Friday, July 31, Digitex Futures Exchange will open the doors and launch zero-commission cryptocurrency futures trading to the public for the very first time. While we’re still two days out from the official release, the DFE platform reached an astounding 24-hour volume high of $2.9 billion in trading volume on Tuesday July 28th, 2020.
To prepare for this Friday’s big launch event, there is no better time to understand how to use the platform and learn the basics of how to trade crypto derivative products. More importantly, having the ability to quickly recognize candlestick patterns can make trading strategies such as scalping highly profitable.
Candlestick Patterns to Level Up Your Scalping Strategy
As the cryptocurrency market sits on the cusp of its next bullish cycle, having a solid trading strategy is a must. Understanding when to buy and sell can make a huge difference in anyone’s portfolio. Although trading is not necessarily easy, there are a number of easy-to-spot candlestick patterns that can help provide a framework about the trending direction of any given asset.
Some of the most popular pair of candlesticks patterns used by professional traders include, bullish and bearish engulfing, morning and evening star, and hammer and shooting star. By no means, the forecast presented by these technical formations is 100% accurate, but they have proven to provide significant opportunities to profit.
Bullish and Bearish Engulfing
Bullish and bearish engulfing patterns are the most widely known candlesticks patterns in trading. These technical formations forecast when upward and downward trends are about to reverse. Therefore, they indicate who is winning the raging battle between the bulls and the bears.
A bullish engulfing pattern develops when a red (purple) candlestick is succeeded by a green (blue) candlestick, which body overlaps the body of the previous candlestick. On the left side of the image below, it shows how the DGTX/USD trading pair is currently developing this type of candlestick pattern, indicating a potential breakout.
Traders with a lot of experience in the industry usually wait for the following candlestick to trade above the engulfing one to enter long positions.
On the other hand, a bearish engulfing pattern signals that prices are bound for a steep correction. The moment a red candlestick overlaps the body of a preceding green candle it suggests that the bears have overtaken the bulls. Thus, sellers will have a better chance to push prices in a downward direction.
As seen in the image above, DGTX went through a corrective period after this technical formation developed on April 10. The token saw its price take a 20% nosedive upon the completion of the bearish engulfing pattern, before it bounced to up to new higher highs.
Morning and Evening Star
Morning and Evening star patterns consist of three candlesticks that describe whether the bull or the bears are taking control of the price action of any asset. These technical formations are also reversal patterns that anticipate oversold and overbought territories. When employed with other indexes, they have proven to be quite accurate.
On DGTX’s 1-day chart, a morning star pattern formed in mid-May following a downward trend. It consisted of three different candlesticks: a large red candlestick, a small-bodied candlestick or doji, and a green candlestick. This technical pattern was able to anticipate that DGTX was about to reverse, which was indeed followed by a 19% upswing.
An evening star, however, is used to detect when an uptrend is about to reverse. This bearish candlestick pattern also consists of three candles: a large green candlestick, a small-bodied candle or doji, and a red candle. As it happened in late May, the occurrence of this technical pattern led to a steep correction across most major digital assets, before prices recovered.
Inverted Hammer and Shooting Star
An inverted hammer and a shooting star pattern look very similar, but they present different scenarios. The former is a bullish candlestick pattern since it tends to occur in a downward trend. Meanwhile, the latter is used to predict that an uptrend is coming to an end.
In mid-December 2019, the DGTX/USD trading pair presented this type of candlestick pattern. It formed at the bottom of a downtrend and acted as a buy signal suggesting a high potential for a reversal to the upside. During that time, the inverted hammer was effectively able to predict an upswing of 19%.
A shooting star pattern formed in early May on DGTX’s daily chart. As seen in the image above, this candlestick pattern formed right on the top of an uptrend while the inverted hammer developed on the bottom of a downtrend. It was able to forecast that DGTX was bound for a correction.
Don’t forget that this Friday, July 31, is our big public launch event, where we’ll raffle $250,000 worth of DGTX as part of our celebration. Ten lucky traders will be awarded with $5,000 in DGTX each, while another 1,000 will take away $200 each. If you haven’t yet set your reminder on YouTube, what are you waiting for? You don’t want to miss out!