Trade Chart Patterns

About Trade Chart Patterns

➤ What is a pattern in a chart?
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Patterns are the distinctive formations created by the movements of security prices on a chart and are the foundation of technical analysis. A pattern is identified by a line connecting common price points, such as closing prices or highs or lows, during a specific period.

➤ How do chart patterns work?
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How do stock chart patterns work? Chart patterns work by representing the market's supply and demand. This causes the trend to move in a certain way on a trading chart, forming a pattern. However, chart pattern movements are not guaranteed, and should be used alongside other methods of market analysis.

➤ What are the three types of chart patterns?
Types of Chart Patterns:
Continuation patterns: These kinds of chart patterns give continuation signals of the ongoing trend.
Reversal Patterns: These kinds of chart patterns give reversal signals.
Bilateral Patterns: These kinds of chart patterns shows uncertainty and high volatility in the market.

➤ How do you trade with chart patterns?
To trade these patterns, simply place an order above or below the formation (following the direction of the ongoing trend, of course). Then go for a target that's at least the size of the chart pattern for wedges and rectangles. For pennants, you can aim higher and target the height of the pennant's mast.

A new type of Chart Patterns Cheat Sheet will be added soon.

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