Long-volume Yang breakthrough + small Yin line with shrinking volume to wash the market buy point

A long-volume Yang breakout followed by a small Yin with shrinking volume signals a bullish washout entry, confirming strength after profit-taking.

Jul 25, 2025 at 05:36 pm

Understanding the Long-Volume Yang Line Breakout Pattern

In the context of cryptocurrency technical analysis, a long-volume Yang line refers to a bullish candlestick with strong upward momentum accompanied by significantly higher trading volume than recent periods. This pattern typically appears after a consolidation or downtrend and signals a potential shift in market sentiment. The term "Yang" originates from Japanese candlestick terminology, where a Yang (white or green) candle indicates that the closing price is higher than the opening price. When this candle appears with extended volume, it suggests strong buying pressure from institutional or aggressive retail participants.

The breakout aspect of this pattern is critical. A breakout occurs when the price moves above a key resistance level, such as a prior swing high, a trendline, or a moving average. When this breakout is confirmed by a long-volume Yang candle, it strengthens the validity of the move. Traders interpret this as a sign that supply has been overwhelmed by demand, and the market may be entering a new uptrend. It is essential to verify that the breakout is not occurring on low liquidity or during low-trading hours, which could lead to false signals.

Role of the Small Yin Line with Shrinking Volume

Following the long-volume Yang breakout, the appearance of a small Yin line (a short red or black candle) with shrinking volume serves as a potential confirmation signal. This candle indicates a temporary pause in the upward momentum. However, due to its small body and reduced volume, it does not represent strong selling pressure. Instead, it often reflects profit-taking or short-term hesitation among traders, rather than a reversal.

The shrinking volume is a key factor. If volume decreases significantly during this pullback, it suggests that sellers are not actively entering the market. This lack of selling interest, combined with the prior strong buying volume, supports the idea that the uptrend remains intact. This phase is commonly referred to as "washing out weak hands"—where less confident traders exit their positions, allowing stronger buyers to consolidate control.

The small Yin line should ideally close well within the body of the previous Yang candle, not erasing more than 50% of its gains. This behavior reinforces the bullish structure and sets the stage for further upward movement.

Identifying the Market Wash and Buy Point

The combination of a long-volume Yang breakout followed by a small Yin line with shrinking volume creates a strategic buy point known as a "washout entry." This setup suggests that the market has tested the breakout level and confirmed its strength through the lack of aggressive selling.

To identify this buy point:

• Confirm the Yang candle closed above a clear resistance zone.
• Ensure the volume on the Yang candle was at least 1.5 times the average volume of the past 10 candles.
• Wait for the next candle to form a small Yin body, ideally less than 30% of the Yang candle’s range.
• Verify that volume on the Yin candle is noticeably lower—preferably below the 10-period average.
• Enter a long position at the close of the Yin candle or on the opening of the next candle.

Using stop-loss placement below the low of the Yin candle helps manage risk. The stop level should not violate the original breakout zone, as that would invalidate the pattern.

Applying the Strategy on Cryptocurrency Charts

To apply this strategy effectively on crypto price charts, traders should use a reliable trading platform such as TradingView or Binance Futures with access to volume and candlestick data.

Steps to set up the analysis:

• Select a cryptocurrency pair, such as BTC/USDT or ETH/USDT, on a 4-hour or daily timeframe.
• Apply a volume indicator below the price chart to monitor volume trends.
• Identify a clear consolidation or resistance area where price has previously reversed.
• Watch for a candle that closes above this level with significantly higher volume.
• After the breakout candle, monitor the next period for a small red candle with lower volume.
• Use horizontal lines to mark the breakout level and the low of the Yin candle for reference.

For automation, traders can create alerts on TradingView using Pine Script:

breakout = close > resistanceLevel and volume > sma(volume, 10) * 1.5
pullback = close < open and abs(close - open) / (high - low) < 0.3 and volume < sma(volume, 10)
alertcondition(breakout and pullback, title="Buy Signal", message="Long-volume Yang breakout with small Yin washout")

This script detects the pattern and triggers an alert when conditions are met.

Risk Management and Confirmation Tools

While the pattern is powerful, risk management is essential in volatile crypto markets. Never allocate more than a predetermined percentage of capital—commonly 1% to 2%—to a single trade.

Additional tools to confirm the signal:

• Use the 20-period EMA to ensure the price is above it, indicating short-term bullish momentum.
• Check RSI (Relative Strength Index); a reading between 50 and 70 confirms strength without being overbought.
• Monitor order book depth on exchanges to confirm bid support near the entry zone.
• Avoid trading this pattern during major news events or low-liquidity periods like weekends.

Position sizing should account for the distance to the stop-loss. For example, if entering at $30,000 with a stop at $29,500, the risk is $500 per unit. Adjust the quantity so that the total risk stays within the trader’s risk tolerance.

Frequently Asked Questions

What if the small Yin candle has high volume instead of shrinking volume?

If the Yin candle shows high volume, it indicates strong selling pressure, which contradicts the washout theory. This could signal distribution or rejection, making the breakout less reliable. In such cases, avoid entering the trade until further confirmation appears.

Can this pattern occur on lower timeframes like 15-minute charts?

Yes, the pattern can appear on lower timeframes, but it is more prone to false signals due to increased noise and market manipulation. It is advisable to use this setup on 4-hour or daily charts for higher reliability, and confirm with higher-timeframe trends.

How do I distinguish between a washout and a reversal?

A washout candle is small with low volume and occurs shortly after a strong breakout. A reversal candle is typically larger, may have high volume, and is followed by consecutive bearish candles that break below key support. Context and follow-through are critical.

Should I use leverage when trading this pattern?

Leverage amplifies both gains and losses. Given the volatility of cryptocurrencies, using high leverage on this setup increases the risk of liquidation, especially if the stop-loss is tight. It is safer to trade with minimal or no leverage, particularly for beginners.