The Anatomy of a Parabolic TrendIn this educational idea I will explain the characteristics of a Curved Parabolic Trend using the chart of BNB:USDT (Binance Coin: US Dollar Token).
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What is a parabolic curve in a uptrend?
The parabolic curve chart pattern is one of the strongest uptrend patterns a financial asset can have. This type of pattern moves upwards at the fastest and furthest rate of any chart pattern. Each retracement or consolidation is quickly bought up by eager investors as more and more money flows into the market due to excitement.
The parabolic curve is named after the parabola, because the ascending curving trend line used to identify the potential support area looks like a parabola:
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In a Bullish Market Parabolic Trends can often form the smaller timeframe trends making up larger timeframe swings. This pattern creates short term price range bases which are Reaccumulation Phases as described below. These accumulation ranges can form multiple times as it the price keeps going higher.
The price action pattern that creates the parabolic curve looks like a staircase. This pattern can last for weeks or months. The maximum point of financial risk comes in at the end of the formation after the final movement is negated and the price fails to hold the obvious Curved Structure. This usually ends in a price plunge that falls even faster than the price rose initially.
These patterns generally occur on financial assets that are market leaders or up and coming and emerging technologies or products in its sector. One important thing to note when identifying a Parabolic Trend is that the price may go much further then people anticipate leading to sellers rebuying their asset they sold initially due to "FOMO" Fear Of Missing Out, leading to the price to "Stair Step" higher and higher as more and more sellers are squeezed out of the Market, until eventually they regain control and the trend is lost.
The key in trading a parabolic trend is to treat it like a investment, identifying the trend and buying early, capturing as much of the move to the upside as possible until the trend is finally over.
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See idea linked below: "Market Cycles & Phases" to understand the topic of trend further.
