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Bitcoin’s megaphone pattern, explained: How to trade it

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Key takeaways

  • The Bitcoin megaphone pattern features at least two higher highs and two lower lows, forming an expanding structure.

  • Connecting these highs and lows with trendlines creates a megaphone-like appearance, reflecting market instability.

  • The formation signals heightened volatility, with price swings becoming more pronounced over time.

  • Depending on the trend direction, the pattern can indicate potential breakouts either upward (bullish) or downward (bearish).

The megaphone pattern, also known as a broadening formation, is a technical analysis chart pattern that traders observe in various financial markets, including cryptocurrencies like Bitcoin. 

This pattern is characterized by its distinctive shape, resembling a megaphone or an expanding triangle, and signifies increasing volatility and market indecision. Here are its defining characteristics:

  • Higher highs and lower lows: The pattern consists of at least two higher highs and two lower lows, forming an expanding structure. Each subsequent peak is higher than the previous one, and each trough is lower, creating diverging trendlines.

  • Diverging trendlines: When trendlines are drawn connecting the higher highs and lower lows, they diverge, forming a broadening pattern that visually resembles a megaphone.

  • Increased volatility: The formation of this pattern indicates heightened volatility as the price swings become more pronounced over time. This reflects a struggle between buyers and sellers, leading to wider price movements.

The megaphone pattern – simplified

Did you know? Bitcoin megaphone trading differs from traditional megaphone trading in that no physical megaphones are involved in the process.

1. Bullish megaphone formation 

This variation of the pattern suggests a potential breakout to the upside.

Bullish megaphone pattern
  • Initial uptrend: The price begins in an uptrend, reaching the first peak (point 1).

  • First retracement: A pullback occurs, creating a lower low (point 2) that is still above the prior trend’s starting level.

  • Higher high formation: The price rallies again, surpassing the previous high and forming a higher high (point 3).

  • Lower low expansion: A more pronounced drop follows, leading to a lower low (point 4), extending the range of price fluctuations.

  • Breakout and continuation: The price breaks above the resistance line (point 5), confirming a bullish breakout.

2. Bearish megaphone formation 

This version of the pattern signals a potential downside breakout.

Trading, How to
  • Initial downtrend: The price begins with a downward movement, setting an initial low (point 1).

  • First retracement: A minor upward correction follows, forming a lower high (point 2).

  • Lower low expansion: A new low forms (point 3), further widening the range.

  • Higher high formation : The price spikes again but still struggles to hold above prior highs (point 4).

  • Breakout and reversal: The price breaks below the support line (point 5), confirming a bearish breakout.

Did you know? A high-volume breakout from a megaphone pattern signals strong market conviction, confirming a real move. Low volume? It’s likely a fakeout, with the price reversing back. Remember, wait for a volume spike before entering.

Megaphone history in Bitcoin trading

The megaphone pattern, or broadening formation, has appeared at various pivotal moments in Bitcoin’s trading history:

1. The early days: 2013–2014

In Bitcoin’s (BTC) formative years, extreme volatility often produced broadening formations. During this period, traders noted megaphone patterns — often with a bearish tint — reflecting wild price swings as the market struggled to find balance. 

Although less documented then, these early examples have since become reference points for understanding how chaotic market conditions can manifest as megaphone formations.

Early Bitcoin megaphone patterns

2. The late 2017–early 2018 bearish formation

As Bitcoin surged toward its then-all-time high near $20,000 in late 2017, a bearish megaphone pattern appeared on daily charts. This formation, marked by diverging trendlines with higher highs and lower lows, signaled increasing indecision and mounting selling pressure. 

Many technical analysts viewed it as a warning sign of an impending reversal — a forecast that materialized with the dramatic correction experienced in early 2018.

An early 2018 bearish Bitcoin megaphone

3. The early 2021 bullish turn

In early 2021, as Bitcoin approached the $60,000 threshold, traders observed a bullish megaphone pattern forming on multiple timeframes. Characterized by a series of progressively higher highs and higher lows, this pattern indicated a period of heightened volatility combined with cautious optimism. 

The subsequent breakout confirmed a strong bullish momentum, reinforcing the pattern’s validity as a predictive tool in a maturing market.

 Bitcoin's early 2021 bullish megaphone

Trading strategies for the megaphone pattern

In this section, we’ll explore a number of trading strategies compatible with the Megaphone pattern. 

1. Megaphone breakout trading 

Breakout megaphone pattern trading involves entering a trade when the price decisively breaks out of the pattern’s boundaries with strong volume confirmation.

a. Identifying key levels

  • Draw upper and lower trendlines: Connect the pattern’s higher highs and lower lows to form the megaphone shape. These trendlines mark the critical resistance and support levels.

  • Confirm the breakout zone: In a bullish scenario, the upper resistance line is the key zone to watch for a breakout. In a bearish scenario, focus on the lower support line.

Megaphone breakout trading

b. Volume confirmation

  • Look for a volume surge: As the price breaches resistance (bullish) or support (bearish), a spike in volume indicates strong market participation.

  • Reduce false breakouts: If volume remains weak at the breakout, there’s a higher chance of a fake move back into the pattern.

c. Entry points

Did you know? Placing your stop-loss inside the megaphone can help prevent excessive losses if the breakout fails and the price slides back into the pattern, giving you added protection in volatile markets.

d. Profit targets

Measure the pattern’s height by finding the vertical distance between its lowest and highest points, then use a portion of this measurement (commonly around 60%) to determine a balanced take-profit level.

By projecting that percentage from the breakout point, whether above the upper resistance (for a bullish scenario) or below the lower support (for a bearish one), traders can set realistic targets while maintaining a favorable risk-to-reward ratio.

2. Swing trading within the pattern

Swing trading within a megaphone pattern involves capitalizing on the interim price moves between its support and resistance boundaries — without necessarily waiting for a definitive breakout.

a. Identify key lines

  • Upper resistance (R1, R2): These lines represent zones where price is likely to encounter selling pressure.

  • Pivot line: A midpoint reference that can act as temporary support or resistance, depending on the direction of the price move.

  • Lower support (S1, S2): Zones where buying pressure may emerge.

Swing trading within the pattern

b. Look for buy signals near support

In a bullish megaphone, consider entering long positions near the lower support lines (S1 or S2), especially when you see a bounce or bullish candlestick formation.

Confirm signals with oscillators (e.g., RSI, stochastics) or volume upticks indicating a shift in momentum.

c. Sell signals near resistance

In a bearish megaphone (or even within a bullish one, if you’re comfortable short-selling), traders may look for short entries near upper resistance lines (R1 or R2).

A candlestick reversal pattern or a decline in volume at these resistance levels can reinforce the likelihood of a price reversal.

d. Stop loss and take profit

Place your stop-loss just above the resistance line (e.g., slightly above R2) to minimize losses if the price breaks out higher. 

For take-profit targets, consider exiting near the pivot line or the first support (S1). In cases of strong downward momentum, take partial profits at S1 and aim for S2 with the remaining position.

e. Use the pivot line as a decision zone

The pivot line in the center often serves as a short-term inflection point:

  • Above the pivot: The bias may be bullish, favoring long positions.

  • Below the pivot: The bias may be bearish, favoring short positions.

If the price consistently hovers around the pivot line with no clear direction, wait for it to test either a support or resistance level to confirm the next swing.

f. Combine volume and indicators

Look for volume spikes at each support or resistance test. An uptick in volume when the price bounces off support or reverses from resistance can signal a stronger move.

Also, tools like the relative strength index (RSI) or moving average convergence/divergence (MACD) can help confirm overbought/oversold conditions, strengthening the case for a reversal trade.

3. False breakout strategy

False breakout megaphone pattern trading involves recognizing when the price briefly breaches the megaphone’s support or resistance, only to quickly return within its boundaries — a scenario often accompanied by low volume.

In such cases, instead of chasing the breakout, traders look for confirmation of the reversal before entering a counter-trend trade. 

This strategy requires identifying key trendlines that define the pattern, monitoring volume for weak breakout signals, and entering a trade once the price re-enters the formation, typically placing stop-loss orders within the pattern to limit losses and setting profit targets based on the measured height of the formation.

Risk management and considerations

Given the inherent volatility of Bitcoin and the wild price swings characteristic of the megaphone pattern, robust risk management is essential to safeguarding your trading capital. Here are several key strategies to incorporate into your trading plan:

1. Volatility awareness

  • The expanding range of the megaphone pattern signifies increasing uncertainty. Recognize that rapid swings can lead to both substantial gains and equally significant losses.

  • Monitor market sentiment closely and be prepared for sudden reversals, especially during false breakouts where low volume might signal a lack of conviction.

2. Position sizing and leverage

  • Position sizing: Determine your position size based on the maximum risk you are willing to take (typically 1%–2% of your trading account).

  • Cautious use of leverage: While leverage can amplify profits, it equally increases potential losses. Use leverage sparingly and ensure your risk parameters can accommodate amplified swings.

3. Stop-loss and take-profit levels

  • Stop-loss orders: Place stop-loss orders just within the megaphone formation’s boundaries. This positioning helps limit losses if the price reverses unexpectedly.

  • Take-profit targets: Calculate your profit targets by measuring the vertical distance of the pattern and projecting a reasonable percentage from the breakout point. This ensures you secure gains while maintaining a favorable risk-to-reward ratio.

4. Adaptive risk controls

Market conditions can shift rapidly. Continuously reassess your trades by:

  • Monitoring volume and momentum: Use volume spikes and momentum indicators to adjust your stop-loss or take-profit levels dynamically, ensuring that your exit strategy adapts to the evolving market.

  • Using trailing stops: Consider employing trailing stop orders to lock in profits as the price moves in your favor while still allowing room for potential gains.

And that’s it — happy megaphone trading! 



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Toncoin in ‘great entry zone’ as Pavel Durov’s France exit fuels TON price rally

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Toncoin (TON) has surged by over 50% in the past week, fueled by news that Telegram founder Pavel Durov has been granted permission to leave France for Dubai.

TON/USDT weekly price chart. Source: TradingView

TON’s bullish reversal, especially after falling to $2.35, its lowest level in a year, has traders eyeing key price levels, with crypto analyst Crypto Patel highlighting a “great entry zone” for long-term investors.

TON is eyeing a 100% rally in 2025

As Crypto Patel notes, TON’s price has “perfectly bounced” from its support level of around $2.50.

Furthermore, the support falls inside the $2.40-3.00 area that served as resistance in December 2022-April 2023 and September 2023-April 2024 periods. The analyst argues that the area now served as a “great entry zone,” citing TON’s ongoing rebound from the same range.

TON/USDT weekly price chart. Source: TradingView/Crypto Patel

A decisive rebound from the $2.40-3.00 zone could have TON target its prevailing descending trendline resistance in the coming weeks, which may push its price toward $5 by June or July.

Related: Wallet in Telegram to list 50 tokens and launch yield program

The upside outlook aligns with analyst Profit Mind’s falling wedge setup, which anticipates the Toncoin price to grow toward the $6 upside target if it breaks above the wedge’s upper trendline.

TON/USDT daily price chart. Source: TradingView

Falling wedges typically resolve when the price breaks above the upper trendline and rises by as much as the pattern’s maximum height.

Analyst Crypto Billion further anticipates a bullish reversal in TON markets, citing its oversold relative strength index (RSI) as a primary catalyst for potential long-term accumulation.

Source: Crypto Billion

Toncoin’s Sharpe ratio, a financial metric used to measure an asset’s risk-adjusted returns, further indicates oversold conditions in the TON market.

As of March 16, the 180-day average ratio had dropped below -25, as denoted in blue. In the past, TON has undergone bullish reversals largely when its Sharpe ratio turned blue, as seen in late 2022 and mid-2023.

TON Sharpe ratio (180 days). Source: CryptoQuant

TON shorts remain dominant

In the derivatives market, Toncoin is witnessing a resurgence in its open interest (OI) — a metric tracking the total number of unsettled TON contracts such as options and futures.

As of March 16, TON’s OI was around $169.12 million, compared to $80.75 million just five days prior.

TON Futures’ OI and funding rates. Source: CoinGlass

On the flip side, TON’s weekly funding rates are treading around negative territory — they marginally rose into positive territory after plunging to -0.678% earlier on March 16.

When funding rates turn negative as OI rises, it often reflects bearish sentiment with aggressive shorting. The 30-day liquidation map tracking TON/USDT on Bybit risks nearly $10 million in long liquidations if the Toncoin price falls toward $2.54.

Bybit TON/USDT 30-day liquidation map (as of March 16). Source: Coinglass

Conversely, the same liquidation map reveals that approximately $12 million worth of short positions could be at risk if TON surpasses the $4 mark.

If this scenario plays out, the cascading effect of forced buybacks could accelerate Toncoin’s upward momentum, sending the price to the aforementioned levels.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.