Gate.io AMA : Reversal K-line Pattern - Round Bottom

Today let's study more about Reversal Technical Pattern - Round Bottom

Definition:
A round bottom means that in the process of the price falling, the rate of decline is getting slower and slower, and the trading volume is also shrinking, and then the price stops falling. The faster it is, the trading volume will gradually increase as the pricerises. Because of its circular arc shape, it is called a round bottom.


As shown in the following picture :
1. Technical characteristics of round bottom
1) It can appear at the end of the decline, or it can appear in the middle of the rise.
2) The price fell and rebounded relatively quickly at first. As the popularity of traders' participation decreased, the strength of the decline and rebound became weaker and weaker. Later, it could not fall or rise, and it was sideways. It was not until new funds entered the market that the priceand began to improve slightly, and began to rise slowly, and then more funds entered the market, driving the price to rise faster.
3) The trading volume becomes smaller and smaller with the downward trend, shrinks to a minimum when it is sideways, and then gradually enlarges as the price rises. When the price accelerated, the trading volume also increased significantly. On the K-line trend, the volume also tends to be arc-shaped.

2. The technical meaning of the round bottom
A round bottom is a relatively reliable signal of a turnaround. Because there are some round bottoms that cannot draw a neckline, traders can enter the market when the price effectively breaks through the neckline, or when the round bottom has not been fully formed, according to other trend technical analysis methods, choose the appropriate time to intervene , and gradually buy more.
The round bottom, like the head and shoulders bottom, is a classic interpretation of the Dow theory's definition of bear and bull markets. First, the back high is lower than the previous high, the back low is lower than the previous low, then the back high equals the previous high, the back low equals the previous low, and finally the latter high is higher than the former high, the latter low is higher than the former low, and finally the bear market ends and the bull market begins. Although the whole conversion process is slow and vague, it perfectly shows the whole process of bear market ending, trading slow down, sideways, slow bullish, and then crazy rises.
A round of uptrend after a round bottom is often characterized by reliability, persistence, rapidity, and violence. It is a technical pattern that traders can easily grasp and profit from. However, because the formation of the round bottom is slow and the fluctuation is small, it is often ignored or impatiently let go by traders.

3. Example of BTC real order

In the 2019-11-24 BTC market, BTC fell from USD 9,800 to USD 9,800 with a maximum drop of 29.6% after 51 days, and then stabilized at USD 6,400 and walked out of a large round bottom shape, rising from USD 64,000 to more than USD 10,000. The largest increase was as high as 57.1%.

Special note
The best entry point for a round bottom is when the price breaks through the neckline. The neckline can be the high point on the upper left edge of the round bottom, or it can be another important location.
Many round bottoms cannot draw a clear neckline. Traders can choose to break out of key positions, important resistance levels, trend lines, and necklines of other technical charts to enter the market at the right time.
There are some round-bottomed patterns that will give an entry signal before the price breaks through the neckline. Traders can enter the market without waiting for the price to break through the round-bottomed neckline. The round bottom has been formed for a long time, and other technical forms have been completed when the round bottom is formed.
If there is no heavy volume when breaking through the neckline, it is very likely to get out of the round bottom of failure. Traders can stand still for a while, observe for a while and then make a decision.

Disclaimer:
This article is for reference only.
Such information provided by Gate.io does not constitute any investment advice and is not responsible for any of your investments.
Regarding technical analysis, market judgment, trading skills, trader sharing, etc., may involve potential risks, investment variables and uncertainties.
This article does not provide or imply any opportunity to guarantee profits.