Recently, I noticed that many people overlook an interesting candlestick pattern that can be useful when analyzing crypto charts. It's called the "Dragon" pattern — it appears infrequently, but when it does, it often signals a trend reversal.

What does this pattern look like? Visually, it resembles a well-known double bottom, but it has its own specifics. The essence is simple: two minima connected by an upward line, called the "neckline." The first bottom forms at the end of a downtrend, then the price rises, and then falls again to roughly the same level. This second bottom is followed by an upward reversal when the price breaks through the neckline. That’s when traders say the decline is over and the market is entering a growth phase.

For the crypto market, where volatility is extreme, this Dragon pattern can serve as a good signal to enter a long position after a prolonged decline. But it needs to be used wisely.

How do I apply this in practice? First, I look for the pattern at key support levels — areas where the price has repeatedly bounced before. Then I wait for the second bottom to form and for the breakout of the neckline. This is critical — without a breakout, it’s just another false signal.

Entry should be right at the breakout level. I place a stop-loss slightly below the second bottom to protect against false signals. I choose take-profit targets based either on nearby resistance levels or simply on the distance between the neckline and the bottoms.

Here’s an example from real life: imagine Bitcoin forming a Dragon pattern after a drop. The first bottom is at $60,000, the price jumps to $65,000 (this is the neckline), then falls back to $60,500 (second bottom). After breaking the $65,000 level, the price starts to rise. Traders who caught this signal would open longs with targets at $70,000 and higher.

But there are pitfalls. The Dragon pattern often produces false signals, especially in the volatile crypto market. Prices can jump sharply, and what looks like a clear pattern can collapse instantly. That’s why I always confirm with volume or oscillators.

Another point is psychological. Traders sometimes see the "Dragon" where it doesn’t exist because they want to see it. This is dangerous. It’s better to wait for clear confirmation than to rush into a trade and lose your deposit.

Conclusion: trading based on the Dragon pattern isn’t a holy grail, but it’s a useful tool in your arsenal. Use it alongside other signals, don’t ignore risks, and always manage your position wisely.