What is the Crocodile Mouth Pattern? Simply put, it is a warning sign of price reaching new highs but losing momentum.

**How the pattern forms**

After a long period of price increase, the fast and slow lines of the MACD continue upward, but the red and green histograms gradually shrink. At this point, the fast and slow lines and the histograms start to open a gap. Meanwhile, the key is that the price hits a new high, but the trading volume actually decreases — this is a classic divergence between volume and price. The momentum is clearly insufficient, and risk begins to accumulate.

**Four signals to watch for**

First, the late stage of an uptrend. The price has already risen significantly, and signs of fatigue appear. Second, high-level consolidation. The price swings within a high range, indicating strong resistance above and too many profit-taking orders. Third, shrinking volume. The price continues upward, but buying volume decreases, making this divergence very dangerous. Fourth, technical indicators become dull. Multiple indicators like MACD, RSI, and moving averages show divergence, indicating that market consensus is loosening.

If these four conditions appear together, the main players are likely quietly distributing their holdings.

**How to use this in practice**

When you see this pattern, don’t rush to chase the high. Volume is the most honest indicator; it cannot deceive. When everyone is excitedly talking about a breakout, a quiet shrinking volume is often the biggest trap. Combining RSI in the overbought zone and MACD histogram contraction, once volume and price divergence is confirmed, it’s time to set a take-profit point.

Understanding these basic patterns can significantly improve your trading success rate. The key is to repeatedly recognize them in real trading and turn these signals into muscle memory.