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PATTERNS, Chart Pattern

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PATTERNS, Chart Pattern

A chart pattern is a pattern that is formed within a chart when prices are graphed. In stock and commodity markets trading, chart pattern studies play a large role during technical analysis. When data is plotted there is usually a pattern which naturally occurs and repeats over a period of time.

There are millions of different investors transacting billions of dollars’ worth of securities each day and it’s nearly impossible to decipher everyone’s motivations. Chart patterns look at the big picture and help to identify trading signals – or signs of future price movements.

One of the three assumptions discussed earlier in this tutorial was that history repeats itself. The theory behind chart patterns is based on this assumption – which certain patterns consistently reappear and tend to produce the same outcomes. For example, as market sentiment shifts from optimism to fear, a certain pattern might emerge before traders and investors start selling and send the stock price lower.

Chart pattern :

Chart patterns have an established definition and criteria, but there are no patterns that tell you with 100% certainty where a security is headed. After all, the richest man in the world would be a trader in that case rather than an investor! The process of identifying chart patterns based on these criteria can be subjective in nature, which is why charting is often seen as more of an art than a science. (For more insight, s

The two most popular chart patterns are reversals and continuations. A reversal pattern signals that a prior trend will reverse upon completion of the pattern, while a continuation pattern signals that the trend will continue once the pattern is complete. These patterns can be found across any time frame.

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