When a coin "hits bottom three times," it's a phrase used in technical analysis to describe a triple bottom chart pattern. This is a very significant pattern for traders because it is a bullish reversal signal.
What It Is?
A triple bottom is a chart pattern that forms at the end of a downtrend. It signals that the selling pressure for the coin is weakening and buyers are taking control, which could lead to a new upward trend.
How to Identify It
The pattern consists of three key parts:
* Three Lows: The price of the coin falls to a specific support level, rebounds, falls to that same level a second time, rebounds, and then falls a third time to that same level. These three lows should be at approximately the same price.
* Two Peaks: Between the three lows, there are two temporary price peaks. The highest point of these peaks forms the neckline or resistance level.
* Breakout: The pattern is only confirmed when the price of the coin rises and breaks decisively above the neckline. This breakout is the key signal that the downtrend is over and a new uptrend has begun.
Think of it like a ball bouncing on the floor three times. Each time it hits the same spot, it can't go any lower, and on the third bounce, it gathers enough force to break through a higher level and fly up.
How Traders Use It
Traders look for a triple bottom as a signal to potentially enter a long position (to buy the coin). The breakout above the neckline is the most important part of the pattern, as it confirms the reversal. A common strategy is to place a trade once the price closes above the neckline and set a target price based on the height of the pattern.
It’s important to remember that this is just one tool in technical analysis. Traders often use other indicators to confirm the signal before making a decision.
