I have been working with technical analysis in the crypto market for a long time and want to share an interesting observation about a rare but quite powerful candlestick pattern that many overlook. It’s about the dragon pattern—a model that often precedes serious trend reversals.

This dragon pattern has a structure similar to a classic double bottom but with its own specifics. You see, when the price falls, it forms the first low—that’s the first point. Then there’s a rebound upward, creating what is called the neckline. And then the price goes down again, but not as deep, forming the second bottom. This is the classic form of the dragon pattern.

What attracts me to this model is that it often signals the end of a downtrend. When the price breaks the neckline after forming the second bottom, it usually indicates a transition into an upward phase. I’ve noticed this multiple times across different timeframes and pairs.

Let’s figure out how to trade this pattern specifically. First, you need to find the dragon pattern at significant support levels—where the price has bounced several times before. This is important because the pattern works more reliably at such levels. After the second bottom forms, I wait for a breakout of the neckline. This is a critical moment—if the breakout occurs, the probability of a reversal is much higher.

I usually set the entry point right at the breakout level. I place the stop-loss slightly below the second bottom to protect against false signals. And for take-profit, I base it on the distance between the neckline and the bottom points—that gives me an approximate target level.

Here’s an example from real practice. Imagine Bitcoin forming a dragon pattern after a prolonged decline. The first bottom at 60,000, the neckline at 65,000, and the second bottom at 60,500. After breaking the 65,000 level, an upward movement begins. Traders who followed this pattern could open long positions and set target levels at 70,000 and higher.

But I have to be honest—the dragon pattern doesn’t always work perfectly. First, it can give false signals, especially in volatile crypto markets. Second, prices can change sharply, and sometimes models that only look like a dragon pattern are formed but are not actually it. Third, the psychological factor—traders sometimes see what they want to see instead of objectively analyzing the chart.

That’s why I always use additional confirmations—I look at trading volumes, apply oscillators, and wait for clear signals before entering. I don’t rush to open positions until I am sufficiently confident. This approach helps me avoid most traps and work more effectively with the dragon pattern in the crypto market.