Gate.io AMA : Reversal K-line Pattern - Dome, Jan.26th

Q : Today let's study more about Reversal K-line Pattern - Dome
A : Let's get to know the basic definition.

Definition:

• A dome means that the currency price rises more and more slowly during the rising process, and the trading volume shrinks more and more. Then the currency price stops rising, and starts to fall slowly after a period of sideways at the top uptrend.
• It is called a dome because of its shape as a downward arc.
• As shown in the following picture :

1.Technical characteristics of the dome
1) It can appear at the end of the rise, or it can appear on the way of the fall.
2) The price of the currency rises and adjusts quickly at first. As the price of the currency continues to rise, the enthusiasm of traders to participate is getting lower and lower. Every time the price of the currency rises, it starts not much higher than the previous high. The strength of the fall is not great. Then the strength of the rise and adjustment became weaker and weaker, and gradually changed from a new high point slightly lower than the previous high point to a new high point slightly lower than the previous high point. Connect the short-term highs to form an arc. In the end, more and more traders began to leave the market, and the price of the currency accelerated.

2.The technical meaning of the dome
1) The dome is a relatively reliable reversal signal, which is more reliable. The reason is relatively simple, the price of the currency is rising, and it needs the promotion of funds. And the price of the currency falls, nothing is needed, as long as no one buys, the price of the currency will fall.
2) The trend after the dome is different from that of the round bottom. After a part of the dome is formed, the downward momentum is like a torrential rain. After another part of the dome head is formed, the coin price does not fall immediately, but adjusts horizontally. The horizontal adjustment area is called the bowl handle. Even so, the technical meaning of the dome bearishness has not changed, and almost all bowl handles will break down soon.
3) Like the round bottom, there are some domes that cannot draw a neckline. But in trend trading techniques, entry and exit are set differently. The entry are strict standards, and all conditions must be met before entry. The exit are different. As long as one of the sufficient conditions and the necessary conditions are met, you can leave the market. Therefore, regardless of whether the dome can draw a neckline, traders can give exit signals based on other trend technical indicators to clear positions before the currency price effectively breaks the neckline.
4) The time period for the formation of the dome is relatively long. After the top is formed, the fluctuation of the currency price is very small, and the decline is not obvious. Many traders tend to ignore subtle exit signals and miss the best opportunity to exit. But after the dome is fully formed, there is one last chance to leave the market technically correct. The dome, is a perfect representation of Dow Theory on bear and bull markets.

3.Example of BTC real order

• In the 2020-7-29 BTC market, BTC rose 35% from $9,100 to $12,400 for 29 consecutive days, and then fell out of the dome pattern from $12,400 to $10,000, a 24-day drop of 18.9%.

4.Special note
1) Like the round bottom, the dome sometimes fails to draw a neckline. Traders must combine other trend technical analysis methods to exit the market in time.
2) The dome falls below the neckline, and there is no volume requirement. Regardless of whether the volume is heavy or not, it does not affect the effectiveness of the break below.
3) Both the round top and the round bottom are reversal patterns, which appear at the top and bottom of the currency price respectively. The two are symmetrical in shape, with opposite directions and technical meanings.

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.

Q: Thanks for all, let's go to question session.