Recently, I noticed again an interesting candlestick pattern that is not often discussed in the crypto community. It’s called the “Dragon” pattern—a rare but quite useful figure for those involved in trading volatile markets.

This pattern often appears when the market is preparing for a reversal. Its structure resembles a classic double bottom but with distinctive features that make it unique. Essentially, it consists of two low points connected by an upward line—the so-called neckline. The first point marks the start of a downtrend, then the price rises to the neckline, then falls again, forming a second bottom roughly at the same level. The final touch is a breakout above the neckline, which often signals a trend reversal.

In crypto trading, this model can be especially valuable because crypto markets are prone to sharp reversals. When you see such a pattern forming, it can be a signal to start a bullish move after a prolonged decline.

How do I usually work with this pattern? First, I look for it at key support levels—where the price has bounced several times before. Then I wait for the second bottom to form near the first one. The main thing is not to rush. You need to wait for a breakout of the neckline, as this gives more confidence that the reversal has truly begun.

The entry point is usually chosen at the breakout itself. I place a stop-loss slightly below the second bottom to protect against false signals. Take-profit can be targeted either at nearby resistance levels or simply by measuring the distance from the neckline to the bottom and projecting the same distance upward.

Here’s an example from practice. Imagine, on Bitcoin, after a prolonged decline, this pattern forms. The first bottom at $60,000, the neckline at $65,000, the second bottom at $60,500. When the price breaks above $65,000 and moves higher, it’s a signal to open a long position with targets at $70,000 and above. Many traders caught the start of the bullish movement exactly this way.

But honestly, this approach has its pitfalls. First, false signals— the pattern can form, but the market may still turn down. That’s why I always look at trading volumes and other indicators for confirmation. Second, crypto volatility can cause patterns to form very quickly and not very clearly. And finally, the psychological aspect—sometimes traders see a dragon everywhere where it doesn’t exist, leading to hasty decisions.

My advice: if you want to use this pattern in your trading, don’t rush. Wait for clear confirmation, check volumes, look at neighboring levels. Then your chances of success will be much higher than with impulsive entries. The Dragon can be a great helper if you take it seriously.