To start off, let's take a look at what the rounding bottom pattern looks like:
Illustration © Investopedia
Sometimes referred to as a “saucer bottom” pattern, the rounding bottom configuration—as shown by the image above—is well-named. It's a gradual curve downward in market value over time which forms a gently-sloping “Letter U” shape. The rounding bottom pattern tends to be a continuation of a downward trend in value, as indicated by the downward-sloping left-to-right line at the far left-hand side of the illustration. As the downward, or “bearish,” trend continues, it eventually flattens out. This indicates that the market has reached its low and will start to rebound. This new upward trend is just as gradual as the downward one preceding it, and the trend line creates the smooth bowl-like shape we see here. It should be noted here that the rounding bottom pattern is somewhat similar to the “cup and handle” pattern, except that the latter has a brief market correction downward before the value rises again; this is considered the “handle” (for more information on the cup and handle pattern, please refer to our article on that topic).
Identifying a rounding bottom pattern is pretty simple—but it takes patience; it's one of the longest-lasting market value graph patterns out there. The pattern is considered fully formed when the upward trend crosses an equal value mark as the downward trend preceding it; this breakthrough point is indicated in the illustration above by the horizontal line indicating that value. The trend is considered reversed only when that breakout point occurs. It follows that a rounding bottom pattern is considered one of the “reversal” type, as it represents a slow and gradual segue from a downward (“bear”) market to a more optimistic upward “bullish” trend.
While a rounding bottom pattern is therefore good news overall, it can take some time for that optimism to pan out. Remember how we said it's a long-lasting pattern? Well, for a rounding bottom to fully form, it can take anywhere from several months to a few years to do so. It can take the patience of a saint—not to mention very steady nerves—to ride out a downward trend in market value that lasts a year or longer! Rounding bottom patterns—especially as they're forming—can be especially frustrating to new investors, because all they tend to see is the first half of the pattern. Down, down, down the price goes, and it can take months before there's a bottom in sight.
We've said it before, and we'll say it again: Investing in digital currency is definitely a place where patience is a virtue. When a trend line is at or near the bottom of a rounding bottom pattern, it's all too easy for a novice investor to panic and decide to sell their shares before the price drops even lower. Believe us, there are trolls and market predators who thrive on that sort of “get out while you can” mentality, and they'll capitalize on it whenever they can. What they realize—and a lot of new investors don't—is that rounding bottoms represent a turnaround in value, and an eventual rise in price. The moral of our story? Your currency is more likely to increase in value over the long run; don't let downward trends and fluctuations push your panic button. And don't make buying or selling decisions on the advice of people you don't know and shouldn't trust.
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